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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Our Conversation of the Day in the equity market with

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Speaker 2: Alisia Levine of BNY Prodigious Math Skills, and we're going

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Speaker 2: to go to that right now for Global at Wall Street.

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Speaker 2: I have never seen a market like this. What happened

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Speaker 2: to Oracle last week? I know you don't do individual stocks.

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Speaker 2: Never have I seen the jump condition we saw an Oracle.

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Speaker 2: We are at Peter roorzag at Wizard is great about

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Speaker 2: glide Pass. They all seem to be thrown out the window.

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Speaker 2: How do we invest in a two part SMP five hundred.

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Speaker 3: Look at what happened last week was extraordinary and it

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Speaker 3: reignited never the excitement over the AI trade. And also

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Speaker 3: that it's broadening. It's not just for the same time.

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Speaker 4: You see it's broadening.

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Speaker 5: I see it broaden.

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Speaker 4: You and Jeff you agree on this.

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Speaker 3: Yes, I see it broadening, and the market the market

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Speaker 3: actually is broadening.

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Speaker 6: I mean, that's the.

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Speaker 3: Talk about small caps, and it's definitely indication the equally

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Speaker 3: weighted SMP is at all time highs as well.

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Speaker 4: I did not know that. Yes, let's the Alicia Levine magic.

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Speaker 3: So there is a broadening here. But yes, the move

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Speaker 3: last week was extraordinary. And you have seen a market

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Speaker 3: like this, and it was in the late nineties, and

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Speaker 3: the question is are we in ninety five or we

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Speaker 3: in ninety Ok, let's go.

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Speaker 4: There, let's rip it up. We're going to fundamental analysis

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Speaker 4: right now. I'm sorry.

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Speaker 2: It's radically different than the late nineties because of free

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Speaker 2: cash flow general directions, they're actually am I right, there's

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Speaker 2: not going to be twenty twenty seven. Oh they actually

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Speaker 2: weren't making profits in twenty twenties.

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Speaker 3: Okay, So on a relative basis, the tech stocks are

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Speaker 3: cheaper than they were twenty five years ago. On a

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Speaker 3: cash flow basis, they are just batting it out of

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Speaker 3: the park on free cash flow margins. And on the

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Speaker 3: operator you can.

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Speaker 4: Say, Aaron Judge, you won't insulveank.

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Speaker 3: So, I mean, these are different companies, but you know,

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Speaker 3: keep the main point, the main point, which is that

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Speaker 3: the FED is cutting into an increased earnings cycle. Okay,

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Speaker 3: S and B earnings estimates are moving higher. The FED

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Speaker 3: is cutting into it. Banks that are at are at

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Speaker 3: all time highs.

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Speaker 5: Hence the melt up is about lead with us here.

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Speaker 7: There's interesting you say that the rally is brought in

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Speaker 7: because we have critics saying and criticizing the fact that

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Speaker 7: the top five stocks are driving twelve percent of the

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Speaker 7: games this year. But given that we have Back of

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Speaker 7: America releasing their fund manager survey, they said that equity

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Speaker 7: allocation is at a seven month high. There's just a

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Speaker 7: big jump in global growth optimism. But at the same

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Speaker 7: time there's a record fifty eight percent saying that stocks

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Speaker 7: are overvalued.

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Speaker 6: How do you square those two?

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Speaker 5: Well, because you have to be in the game.

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Speaker 3: I mean, when you manage a live portfolio and you're

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Speaker 3: under allocated and you're waiting for that S and P

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Speaker 3: target of whatever, fifty eight hundred and it's not happening,

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Speaker 3: you've got to get invested in.

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Speaker 4: So far behind her.

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Speaker 2: Active managers right now to Isabelle's great questions.

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Speaker 3: So, I think in the US less they think they're

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Speaker 3: less under allocated, but I think global managers are under

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Speaker 3: allocated because the flee America conversation was everywhere. I actually

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Speaker 3: wrote a piece about how ridiculous the Flea America trade is,

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Speaker 3: because where where else are you going for innovation and

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Speaker 3: global and growth and margins and earnings?

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Speaker 2: Power is about Lee Actually read your piece, so you

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Speaker 2: know is about lead with this folks, and for Paul

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Speaker 2: Sweety today, I see your nefarious deed here you are

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Speaker 2: asking questions of the equity giant Alicia Levine for your

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Speaker 2: print stories today.

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Speaker 4: I see what you're doing here.

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Speaker 6: I always watch Alicia.

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Speaker 7: She's such a smart talking head and she's also a

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Speaker 7: fantastic female. We were just talking about shopping in France.

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Speaker 7: But back to market.

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Speaker 4: It's luxury back. Oh, it's a sector back.

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Speaker 3: Luxury is back. Luxury is back. Look what's happened to

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Speaker 3: household net worth? Okay, household net worth is up about

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Speaker 3: seventy trillion dollars since the beginning of twenty twenty. That

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Speaker 3: means households with financial assets housing and equities and socks

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Speaker 3: and bonds and private equity are doing quite well.

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Speaker 5: We have the case. We do have the K shaped

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Speaker 5: consumer here, but we've had it.

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Speaker 6: This is not new.

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Speaker 3: What's happening is that the top three Quinn tiles are

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Speaker 3: seeing their net worth growing, supporting consumption even in the

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Speaker 3: face of a weaker labor market.

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Speaker 7: Did you see that that, Tom, we have the most

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Speaker 7: number of millionaires in New York than ever before, or

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Speaker 7: something like that. I just know I'm working towards being

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Speaker 7: one of them. But going back to luxury, how do

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Speaker 7: you assess the health of American consumer? Do you look

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Speaker 7: at luxury or mid tier or value? What is your

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Speaker 7: favorite tier to look at?

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Speaker 2: Well?

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Speaker 3: Who luxury is everybody's favorite tier, let's just say that,

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Speaker 3: but you really have to look at the mid range

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Speaker 3: as well. We're going to get retail sales today, so

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Speaker 3: we'll see where it's happening. I imagine there's some slow down.

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Speaker 3: I think there is some anxiety in the labor market,

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Speaker 3: particularly for the younger cohort and that's why the FED

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Speaker 3: is cutting. But I'd say that, you know, for the

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Speaker 3: most part, it's better than feared.

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Speaker 5: Right, And the conversations had gotten so negative.

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Speaker 3: I mean, we sat around this table, you know, the

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Speaker 3: apocalypse in April, and you just invest right.

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Speaker 4: Through the number one negative folks.

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Speaker 2: Dana Telsea with this at eight twenty five, Alicia, if

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Speaker 2: you want to stay around.

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Speaker 4: For forty minutes in the green room. You can come

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Speaker 4: in and do Dana Telsis.

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Speaker 5: I love Data Telsa on luxury.

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Speaker 4: But to speak of the gloom China flat on their back.

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Speaker 2: And I believe we've got an equity lift in China

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Speaker 2: and of course to Dana Telsea's luxury sector, that will

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Speaker 2: bring a recovery there as a theory.

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Speaker 3: Right right, and because there'll be more stimulus as well,

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Speaker 3: they'll be more stimulus from the Chinese government.

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Speaker 4: Let's get back to the bigger picture. What do people do?

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Speaker 2: You go into a meeting for BNY and I can't

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Speaker 2: imagine the percentage of the people that have missed this

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Speaker 2: greater Christmas Eve twenty eighteen bull market.

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Speaker 5: That's right, how do you catch up?

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Speaker 3: So we always say it's time in the market and

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Speaker 3: not timing the market. So if you're completely under allocated

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Speaker 3: and you come to us with cash, we'd say do

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Speaker 3: a full portfolio allocation over the next three to four months,

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Speaker 3: so you know, one third, one third, one third or

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Speaker 3: twenty five percent, twenty five percent and do a full

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Speaker 3: portfolio allocation. Whatever your risk tolerance, whatever your growth uh,

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Speaker 3: you know, goals are. That's what we would say, it's

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Speaker 3: impossible to time the market. You know, strategy committees and

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Speaker 3: investment committees everywhere. We're waiting for that equity pullback to

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Speaker 3: bring on more risk, and it never happened.

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Speaker 5: And what do we have.

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Speaker 3: We had spreads at historic tights. We have equity markets

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Speaker 3: making new highs every day and very hard to get in.

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Speaker 3: So where are we today. We're broaching the sixty seven

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Speaker 3: hundred price target on the SMP that was actually my

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Speaker 3: price target for year end.

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Speaker 5: We're there.

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Speaker 3: I think the good news is in, can there be

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Speaker 3: a selloff on the news on the Fed? Like the

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Speaker 3: FED cuts are already in the market, so it's hard

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Speaker 3: to play future FED cuts like it's there. That's why

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Speaker 3: you've had this voracious rally in the last four weeks,

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Speaker 3: really since August first, since that first terrible jobs report and.

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Speaker 5: The revisions good one market.

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Speaker 7: It's actually incredible how the price targets are being revised

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Speaker 7: higher and higher. I want to talk about one concern

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Speaker 7: you have in your note. You said it's the monetization

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Speaker 7: of capex and hyperscalers.

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Speaker 6: That seems so specific to me. Why is that your

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Speaker 6: biggest concern?

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Speaker 3: So, because it goes back to the concentration of what's

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Speaker 3: happening in the S and P, the margins on the

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Speaker 3: S and P and the pre cash flow margins and

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Speaker 3: being driven by the hyperscalers.

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Speaker 5: Right, So the large cab.

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Speaker 3: Tech operating profit is twenty seven percent, that's double the

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Speaker 3: rest of the SMP. If they keep on spending on

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Speaker 3: the capex and at some point don't bring that to

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Speaker 3: earnings or bring that to a revenue line, then you

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Speaker 3: have to question whether this is going anywhere.

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Speaker 5: We're not there yet.

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Speaker 3: You're getting paid to wait, but you have to see

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Speaker 3: the monetization of all that CAPEC spent. So you're starting

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Speaker 3: to see it with Oracle right like it's starting to

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Speaker 3: happen in other companies as well. The market will soon

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Speaker 3: choose winners from the AI race. Don't know when that'll

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Speaker 3: be a dislocation of sources. But overall, the main thing

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Speaker 3: is the main thing. Growth is inflecting upwards, not downwards.

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Speaker 3: For twenty twenty six, consumer stimulus is coming from the

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Speaker 3: tax bill. The first quarter of twenty twenty six, the

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Speaker 3: Fed is cutting and here.

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Speaker 4: We are, Alicia, thank you so much. I'm serious.

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Speaker 2: If you want to stay around for Dana Kelsey, please

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Speaker 2: you know it'd be great. I mean, we can spend

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Speaker 2: the whole show just on Dior. If you know there's

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Speaker 2: two front doors to Dior on fifty seventh Street.

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Speaker 6: I did not know that.

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Speaker 2: One is where you go through with the visit of

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Speaker 2: Hayford All and the others are Missus King goes through

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Speaker 2: to be greeted back.

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Speaker 5: We love well. I'll join Dana at your.

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Speaker 4: Yeah Data at your Alicia Luvin. Thank you so much.

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Speaker 4: Stay with us.

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Speaker 2: More from Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

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Speaker 1: watch us live on YouTube now.

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Speaker 2: Two hour conversation in the eight minutes, plus retail sales

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Speaker 2: at eight thirty with Dana Telsea. It is an annual

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Speaker 2: visit in celebration of how thick Bazarre Magazine is. For

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Speaker 2: this September issue, how did Giorgio Armani change the corner

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Speaker 2: of fifty seventh and fifth Avenue incredible?

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Speaker 8: I mean, frankly, thank you for having me. Georgia Amani

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Speaker 8: is to me is the one who brought luxury into

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Speaker 8: the US on a European framework.

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Speaker 2: He brought Europe to America day. Thank you, Richard gear

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Speaker 2: I mean that's basically what happened.

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Speaker 8: Yes, look at what he's developed, whether it is with stores,

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Speaker 8: whether it's his whole be in terms of what it is,

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Speaker 8: and yes, I think the later years were tougher than

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Speaker 8: the beginning years, but there's always a place for ARMANI

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Speaker 8: are you long luxury now?

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Speaker 2: As China finally tanked, and so the luxury that's tanked

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Speaker 2: is going to be a buying opportunity.

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Speaker 8: I think it will be a buying opportunity over time.

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Speaker 8: I don't think we're totally there yet. I still think

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Speaker 8: you're having pressure points there. I think what you've seen

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Speaker 8: is where anything's new and anything's innovative, consumers will purchase

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Speaker 8: same old, same old.

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Speaker 5: Doesn't happen these days.

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Speaker 7: So Tom kept on talking about Dior and I really

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Speaker 7: need to go in there, But for now, let's go

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Speaker 7: to Tapestry. They had their investor a day last week.

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Speaker 7: What were to takeaways that you got? How are the

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Speaker 7: health of the American consumers through the lens of Tapestry.

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Speaker 8: Through the lens of Tapestry. It was a very productive

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Speaker 8: investor day. The outlook is solid for the next few years.

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Speaker 8: I would say that the core Coach brand and the

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Speaker 8: way that they've been able to put in different items

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Speaker 8: of collections like Tabby and Brooklyn have made it appealing.

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Speaker 8: Plus they're capturing the younger customer. Every brand today needs

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Speaker 8: to always be able to market to capture new customers,

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Speaker 8: keep the old, expand with the new.

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Speaker 7: So Tapestry, there's Coach, there's Kate Spade, and it's the

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Speaker 7: word Whitesman. I think there's gone with They're.

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Speaker 8: Sold Strut Whitesman that was sold to Kolaris a couple

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Speaker 8: of months ago.

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Speaker 5: It's Coach and Kate Spade.

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Speaker 8: The playbook of Coach is going to be applied to

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Speaker 8: Kate Spade and let's see what happens going forward.

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Speaker 7: What about Ralph Lauren they're having to investor day today.

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Speaker 7: I feel like they say they're seeing revenue growth similar

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Speaker 7: to reason rates over the next three years.

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Speaker 6: So is that good or bad? How do you read?

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Speaker 8: I think overall, when you think about Ralph Lauren and

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Speaker 8: I'll be at their investor today, this day, today, this morning, I.

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Speaker 6: Think it's good.

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Speaker 8: I think how would you not want to go to?

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Speaker 8: Both brand legacy and brand history hard to find, but

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Speaker 8: Ralph Lauren, solid average unit retail price growth, You've got

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Speaker 8: solid expansion of categories, whether it's women's, whether it's out ofwear,

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Speaker 8: whether it's accessories. You've got global reach because frankly, in

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Speaker 8: Asia they'll looked upon as.

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Speaker 5: Higher end still in that body, Yes they are Asia,

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Speaker 5: and they've expanded their customer base.

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Speaker 4: Dana Telsea with a Telsey Advisor, a group.

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Speaker 2: I can't say enough about what she's done for securities

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Speaker 2: analysis in New York City. It is an annual kickoff

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Speaker 2: visit for September economic data. Here in two minutes, Okay,

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Speaker 2: I look at the entire thing and at gunpoint missus

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Speaker 2: Keane made me watch the Anderson launch it Dior the

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Speaker 2: other night, a video and it's all the beautiful people.

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Speaker 2: I was looking for you in the third, second, third

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Speaker 2: row there, Dana Telsea with you. I don't even know

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Speaker 2: who the half the actors are that were there. Everybody's churning.

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Speaker 2: Mister Arnault's there and you can see he's in a

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Speaker 2: complete panic about the LVMH experiment.

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Speaker 4: Is are they going to sell off the brands? That

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Speaker 4: aren't working. Is that the new.

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Speaker 8: New from that's I don't know if that's the new

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Speaker 8: new for luxury and maybe for some of the accessible

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Speaker 8: luxury brands.

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Speaker 5: Look what you had just announced.

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Speaker 8: Yesterday, v F Corps sold Dickie's workware, not a luxury brand.

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Speaker 8: But you're seeing portfolio enhancement. You want to call a

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Speaker 8: portfolio optimization. How do we get more from existing brands?

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Speaker 2: All the control room is Dickie's luxury ware? Is that

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Speaker 2: a luxury stock? I think Dickie's is a luxury stock,

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Speaker 2: isn't it. Yeah they're saying, yeah, yeah it is. So

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Speaker 2: there's a restructuring in fashion. Is it still aspirational where

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Speaker 2: people want the stuff?

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Speaker 5: Yes, it definitely is still abspirational.

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Speaker 8: And you know what's changed these days when you have TikTok,

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Speaker 8: when you have Instagram, seeing it on real people makes

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Speaker 8: it accessible to all.

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Speaker 7: And you're the one who told me that even if

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Speaker 7: you can't afford the bags, you can afford the lipstick

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Speaker 7: or the perfume, and that makes it fast exactly.

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Speaker 8: Well, you heard about lvmah, the Louis Vuitton lipstick one

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Speaker 8: hundred and sixty dollars.

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Speaker 2: Let's come back and talk about the LVMH lipstick in

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Speaker 2: one hundred and sixty dollars. We're a Dana Telsea this

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Speaker 2: morning on Retail America, and you've got a revision where

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Speaker 2: retail sales were revised higher. In the previous month. The

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Speaker 2: control group was a zero point four statistic and it

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Speaker 2: came in at a buoyant zero point seven. Some equity

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Speaker 2: lift to the market and yields higher. Is well, where

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Speaker 2: is it coming in retail? Is it big box retail?

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Speaker 2: Walmart's just killing it? Is it a lost middle area

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Speaker 2: or is it in the luxury area? Where's the retail

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Speaker 2: pop that I see on the.

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Speaker 5: Bloomberg st I think the retail prop is in value.

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Speaker 8: The retail pop is with Walmart, it's with Costco, it's

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Speaker 8: with the off pricers. You've seen a trading down of

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Speaker 8: even higher end consumers and they're going to some of

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Speaker 8: these value stores. And you saw it in second quarter earnings.

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Speaker 8: Second quarter earnings which were reported the end of August

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Speaker 8: essentially showed that even so far in the current quarter,

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Speaker 8: sales are better than expected. Show them something new and

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Speaker 8: they will buy.

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Speaker 7: So then how do you assess the health of the

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Speaker 7: consumer when it comes to big box retail is like

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Speaker 7: Walmart or Target. We've seen a divergence quite recently, right,

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Speaker 7: and that was surprising to me because I usually clump

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Speaker 7: them in one yep.

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Speaker 8: One of the differences there's basically micro relative to the company.

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Speaker 8: Target has worked to do to improve their assortment, to

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Speaker 8: improve their operations. There's a lot of store standards that

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Speaker 8: need to be adjusted. Walmart is hitting on all cylinders

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Speaker 8: and is taking share.

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Speaker 4: Well, they have a forty multiple. How does Joe Feldman,

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Speaker 4: your colleague, respond to a single digit revenue growth? Making

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Speaker 4: solid but you know, normal retail profits trading it a

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Speaker 4: pe of forty. That's not in my textbook.

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Speaker 5: It's not in the textbook.

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Speaker 8: But the consistency of it, the market share gains that

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Speaker 8: they have, the pricing that they offer, the value that

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Speaker 8: they offer.

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Speaker 5: They unique in the world of retail.

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Speaker 7: Which companies are best positioned to absorb higher cast when

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Speaker 7: it comes to this entire tire regime, and I suspect

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Speaker 7: there might be a lot the top of mind, Can

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Speaker 7: you name maybe two?

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Speaker 8: Well, I think of companies that can absorb pricing, pricing.

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Speaker 8: The off pricers can absorb pricing because they're the umbrella

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Speaker 8: for everyone else, So TJX, the Ross of Burlington, and

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Speaker 8: of course.

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Speaker 7: Walmart Burlington socks. I always that was the socks they

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Speaker 7: were when I was little.

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Speaker 2: Are they passing? Are they passing on tariff? Say at

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Speaker 2: TJ Max.

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Speaker 5: You're beginning to see teriffs be passed on.

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Speaker 8: But it all starts from if the full price retailer

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Speaker 8: passes on, then it goes to others. Also, it's expected

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Speaker 8: that price increases, for the most part, will come fully

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Speaker 8: into play in the fourth quarter.

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Speaker 2: One final question I got to ask, and I guess

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Speaker 2: it's you know, I got to go to the New

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Speaker 2: York City Angle a couple of years on. Is Tiffany

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Speaker 2: worked out for mister Arnault.

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Speaker 5: I think it is working out.

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Speaker 8: They're getting more traffic, they're getting new designs. The new

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Speaker 8: stores that they've remodeled have given a lift that they

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Speaker 8: want't have seen before.

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Speaker 4: Are they still popping? In Japan? And I stood outside

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Speaker 4: the Tiffany's store there in.

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Speaker 8: The Did you see the news store on the on

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Speaker 8: the Ginza that has the blue outside?

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Speaker 4: Yeah?

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Speaker 5: Pretty yeah.

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Speaker 2: We supposed to fly over and look at it. And

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Speaker 2: I'm like, no, I don't think so okay. And finally

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Speaker 2: Isabelle was talking about this earlier. The Deer's Store is spectacular.

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Speaker 2: Is that going to be the future of European investment

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Speaker 2: in the island of Manhattan.

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Speaker 4: Is to do a door part of it?

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Speaker 8: Yes, I think for the ultra luxury companies, and that

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Speaker 8: do your Store is going to be replicated in Beverly

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Speaker 8: Hills because that one's opening in just a couple.

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Speaker 4: Of weeks after Lucas show. Will want to know about that.

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Speaker 2: Danny Telsey brilliant always in September important. She's with a

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Speaker 2: Telsea advisory group with Joe Feldman on Big Box Stay

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Speaker 2: with us. More from Bloomberg Surveillance coming up after this.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven on Apple, Cocklay and Android Otto with

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Speaker 1: the Bloomberg Business App. You can also listen live on

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Speaker 1: Amazon Alexa from our flagship New York station. Just say

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Speaker 1: Alexa play Bloomberg eleven thirty.

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Speaker 4: This is a joy as you get the markets open

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Speaker 4: here at today. We usually talked to her by batphone.

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Speaker 4: You know about the zoom out to Hollywood and Los Angeles.

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Speaker 2: Lisa Crawford is how to securitized research at TCW.

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Speaker 4: I got to ask you one question.

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Speaker 2: There's double majors in America, and I give Warden great

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Speaker 2: credit for really to me doing the first double major.

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Speaker 2: But Yale around Jonathan Spence and China's Studies and all

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Speaker 2: that piece together a double major years ago called Political

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Speaker 2: Science and International Studies, which is just phenomenal.

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Speaker 4: What was it like doing a double barreled thing at Yale?

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Speaker 5: Absolutely?

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Speaker 9: So, I chose international studies because I was raised to

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Speaker 9: be a citizen of the world by my dad's We

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Speaker 9: moved around a decent amount that was important to me

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Speaker 9: that was only offered as a second major. So I

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Speaker 9: originally had econ for my primary Maidie Sure. Then I

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Speaker 9: looked up and I had a four point zero and POLYCI,

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Speaker 9: So I decided I'd be POLYCI for my first major.

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Speaker 2: So you you you you changed your major because Schiller

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Speaker 2: gave you a quality C.

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Speaker 9: I changed my major because I started applying to finance

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Speaker 9: jobs and it looked more competitive to have a higher

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Speaker 9: GPA for your for your primary.

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Speaker 4: Ruthless, What a modern discussion. I mean, it's just does

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Speaker 4: everybody get a's today? Is there anybody get a B anymore?

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Speaker 6: I don't know.

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Speaker 7: I don't know any young folks, but some are doing

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Speaker 7: past fail pass fail.

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Speaker 2: Don't get me going lazy craft for this or thrilled.

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Speaker 2: She's in studio with us and it's on the fixed

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Speaker 2: income market. How is your world of trust company the West?

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Speaker 2: How is securitized research linked to the Fed?

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Speaker 5: Oh? Absolutely so.

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Speaker 9: Rates are obviously very important in multiple ways. I'll touch

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Speaker 9: on too. So first and foremost, we've seen a nice

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Speaker 9: rally and treasury and that's been beneficial for the agency

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Speaker 9: mortage backed securities market and a lot of our positioning there.

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Speaker 5: You've got current coupon spreads.

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Speaker 9: Around high one tens right now versus that was as

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Speaker 9: wide as kind of one nineties area late twenty twenty

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Speaker 9: three before the Fed signals they were pressing.

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Speaker 4: So I've yeeled down to perfection.

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Speaker 6: It's beautiful.

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Speaker 7: How do you expect refinancing risks to evolve though in

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Speaker 7: this year landscape?

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Speaker 6: Given the higher interest rate?

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Speaker 9: Sure on the commercial real estate side, we've had a

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Speaker 9: great market to take advantage of for the last few

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Speaker 9: years because of the dislocation from higher rates higher rates,

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Speaker 9: it's established a bit of a K shaped recovery. So

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Speaker 9: weaker assets that have seen significant value decline and have

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Speaker 9: leverage beyond the asset value. You're seeing sponsors strategically walk,

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Speaker 9: and then you're seeing sponsors remain committed to working through

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Speaker 9: some of their over lever debt for their quality assets

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Speaker 9: that remain core in their portfolios.

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Speaker 6: Let's not jump to asset backs.

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Speaker 7: Find us because your notes were really robust that this

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Speaker 7: space is not something I'm super inexpret in, but your

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Speaker 7: notes are very helpful.

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Speaker 6: So in the ABF space, what.

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Speaker 7: Are some opportunities you're seeing and quote the different flavors

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Speaker 7: of profile when it comes to that, any key risks

445
00:21:00,920 --> 00:21:02,000
Speaker 7: in mind for sure.

446
00:21:02,040 --> 00:21:04,000
Speaker 9: So the acid back finance is the new term that

447
00:21:04,040 --> 00:21:07,480
Speaker 9: everyone likes to use for less liquid securitized exposure, and

448
00:21:07,800 --> 00:21:09,960
Speaker 9: we've always used it as a tool in our toolkit,

449
00:21:10,000 --> 00:21:13,160
Speaker 9: whether it's to pick up incremental spread or scale access

450
00:21:13,200 --> 00:21:16,159
Speaker 9: loans for better capital treatment for some investors. And then

451
00:21:16,200 --> 00:21:18,760
Speaker 9: now we're seeing more of our acid allocator clients focus

452
00:21:18,800 --> 00:21:22,080
Speaker 9: on dedicated exposure. They're typically trying to solve for better

453
00:21:22,119 --> 00:21:27,120
Speaker 9: diversification in their portfolios, less mark to market volatility, higher

454
00:21:27,160 --> 00:21:30,000
Speaker 9: yield profiles as well. So it's a really fun time

455
00:21:30,040 --> 00:21:31,600
Speaker 9: to deliver solutions into them.

456
00:21:31,640 --> 00:21:33,480
Speaker 4: Yeah, that's what they said in two thousand and six.

457
00:21:33,760 --> 00:21:38,040
Speaker 2: Remember your clos and colos, squares and all that under

458
00:21:38,240 --> 00:21:42,639
Speaker 2: whatever you said, asset based whatever. Give us an example.

459
00:21:43,720 --> 00:21:46,840
Speaker 2: Is it like aircraft leasing or tractor trailers?

460
00:21:46,920 --> 00:21:50,399
Speaker 9: Yeah, so if I were to buy a collateral pool

461
00:21:50,480 --> 00:21:53,680
Speaker 9: of aircraft loans or exposure to aircraft leases in a less

462
00:21:53,680 --> 00:21:56,040
Speaker 9: liquid form, we could call that acid backed finans. You

463
00:21:56,080 --> 00:21:59,720
Speaker 9: also see asset back finance active in fund finance more broadly,

464
00:22:00,000 --> 00:22:02,760
Speaker 9: whether that's net asset value loans or subscription.

465
00:22:02,320 --> 00:22:03,639
Speaker 4: Line loans killing me.

466
00:22:03,800 --> 00:22:06,160
Speaker 5: I know, I know. Secure size is so fun.

467
00:22:07,160 --> 00:22:10,200
Speaker 9: Yes, And then you'll also see things like syndicated warehouse.

468
00:22:10,280 --> 00:22:12,320
Speaker 9: I thought you might appreciate that as well, and you

469
00:22:12,320 --> 00:22:13,560
Speaker 9: can add structure to that.

470
00:22:14,000 --> 00:22:17,720
Speaker 4: Syndicated where else they play toads in New Haven?

471
00:22:17,800 --> 00:22:21,240
Speaker 2: Back when you're there where Eliza Crawford, she's with Trust

472
00:22:21,280 --> 00:22:27,040
Speaker 2: Company of the West tc W. Mark Pittman owned your

473
00:22:27,119 --> 00:22:30,320
Speaker 2: world for Bloomberg. He won every award out there. His

474
00:22:30,480 --> 00:22:34,200
Speaker 2: death was far too soon for all of us at Bloomberg.

475
00:22:34,560 --> 00:22:37,919
Speaker 2: Mark Pittman would ask this question today, where are the

476
00:22:37,960 --> 00:22:43,159
Speaker 2: shadows within the belief, the faith, the intellectual reach to

477
00:22:43,240 --> 00:22:47,560
Speaker 2: do securitized finance where's the worry points like in two

478
00:22:47,640 --> 00:22:48,320
Speaker 2: thousand and six.

479
00:22:48,720 --> 00:22:52,320
Speaker 9: Yes, so we're always mindful about what the underlying cash

480
00:22:52,359 --> 00:22:55,040
Speaker 9: flows look like and what the principal value of anything

481
00:22:55,080 --> 00:22:57,560
Speaker 9: we're lending on is. And so when you get into

482
00:22:57,560 --> 00:23:00,879
Speaker 9: too much structural complexity, you need to very sharp on

483
00:23:00,960 --> 00:23:03,119
Speaker 9: figuring out what your rights are, what your cash flows

484
00:23:03,160 --> 00:23:07,480
Speaker 9: look like in your ultimate return on investment. So that's ongoing,

485
00:23:07,520 --> 00:23:10,080
Speaker 9: and so there are creative structures out there that don't

486
00:23:10,119 --> 00:23:10,400
Speaker 9: make sense.

487
00:23:10,760 --> 00:23:14,440
Speaker 2: So critically David Goldbenex Bank of America was iconic on this.

488
00:23:14,960 --> 00:23:19,480
Speaker 2: It's a study of trunches. Yeah, where is the trunch risk?

489
00:23:19,600 --> 00:23:19,800
Speaker 4: Now?

490
00:23:19,920 --> 00:23:22,600
Speaker 2: Is it the garbage at the bottom of the deck

491
00:23:23,000 --> 00:23:25,960
Speaker 2: or is it trunch risk in the price to perfection area?

492
00:23:27,240 --> 00:23:30,080
Speaker 9: It's really more I frame it more the bottom of

493
00:23:30,119 --> 00:23:33,440
Speaker 9: the capital structure. So there's especially when we think about

494
00:23:33,680 --> 00:23:35,840
Speaker 9: less liquid or if you call that shadows. You've got

495
00:23:35,880 --> 00:23:38,520
Speaker 9: plenty of things that are considered private ig and private

496
00:23:38,520 --> 00:23:41,160
Speaker 9: investment grade, and those are very high quality. But if

497
00:23:41,160 --> 00:23:43,120
Speaker 9: you are to take something that might have a little

498
00:23:43,160 --> 00:23:45,600
Speaker 9: more operational risk, or it might have a little more

499
00:23:45,640 --> 00:23:48,560
Speaker 9: market risk than expected, and you trunch that up and

500
00:23:48,600 --> 00:23:49,920
Speaker 9: you're taking first loss risk.

501
00:23:50,200 --> 00:23:51,440
Speaker 5: You are exposed if.

502
00:23:51,359 --> 00:23:54,440
Speaker 9: Something goes wrong with that originator or that collateral profile,

503
00:23:54,520 --> 00:23:56,600
Speaker 9: that idiosyncratic risk, so you're exposed.

504
00:23:56,720 --> 00:23:59,359
Speaker 4: I was younger in two thousand and six. It's the

505
00:23:59,400 --> 00:24:00,560
Speaker 4: same kindsation.

506
00:24:00,960 --> 00:24:04,440
Speaker 7: Continue in your note this got my interest. You talked

507
00:24:04,440 --> 00:24:08,440
Speaker 7: about digital infrastructure. So within structured finance, do you think

508
00:24:08,440 --> 00:24:13,800
Speaker 7: that digital infrastructure securitization will become a permanent asset class.

509
00:24:14,000 --> 00:24:16,240
Speaker 5: I do think it will be. We've seen it grow.

510
00:24:16,320 --> 00:24:18,960
Speaker 9: I think the first asset backed security was twenty eighteen,

511
00:24:19,040 --> 00:24:21,560
Speaker 9: the first commercial MORGE backed security was twenty twenty two.

512
00:24:21,880 --> 00:24:25,119
Speaker 9: There's so much need for in particular data center financing,

513
00:24:25,359 --> 00:24:28,919
Speaker 9: that it's going to come through every debt pipe in

514
00:24:28,960 --> 00:24:31,919
Speaker 9: the market. And then that being said, we're mindful for

515
00:24:31,960 --> 00:24:35,440
Speaker 9: two reasons. One, there are better profiles and weaker profiles

516
00:24:35,480 --> 00:24:37,919
Speaker 9: and different ways to take advantage of the market. And

517
00:24:37,920 --> 00:24:40,920
Speaker 9: then additionally, the supply serge should at some point put

518
00:24:40,960 --> 00:24:43,960
Speaker 9: some pressure on spreads. We would anticipate that, So we're

519
00:24:43,960 --> 00:24:46,880
Speaker 9: also mindful about relative value private credit.

520
00:24:47,280 --> 00:24:50,080
Speaker 2: Is there a leverage in there hidden that we don't see,

521
00:24:50,160 --> 00:24:50,960
Speaker 2: that we don't know?

522
00:24:51,880 --> 00:24:54,800
Speaker 9: All speak to the asset backside of private credit and

523
00:24:55,560 --> 00:24:58,600
Speaker 9: the leverage that you might that might be more blatant.

524
00:24:58,640 --> 00:25:01,440
Speaker 9: Is more of that kind of warehouse financing. Right, Ultimately,

525
00:25:01,480 --> 00:25:03,520
Speaker 9: warehouse is levered profile.

526
00:25:03,560 --> 00:25:05,080
Speaker 4: So can you use the word mezzanine.

527
00:25:05,280 --> 00:25:10,000
Speaker 9: Yes, and mezzanine is live and well and so really

528
00:25:10,000 --> 00:25:12,600
Speaker 9: it's picking your spots for the collateral profile that you're

529
00:25:12,960 --> 00:25:15,800
Speaker 9: you've got some sort of exposure to and feeling high

530
00:25:15,800 --> 00:25:18,840
Speaker 9: conviction about both the performance of that collateral and then

531
00:25:18,880 --> 00:25:20,960
Speaker 9: your rights upon an event of default or some type

532
00:25:20,960 --> 00:25:22,240
Speaker 9: of distress in the performance.

533
00:25:22,640 --> 00:25:24,359
Speaker 4: Eliza, thank you so much. LESA.

534
00:25:24,400 --> 00:25:28,200
Speaker 2: Crawford is of Securitized Research at TCW.

535
00:25:28,600 --> 00:25:29,320
Speaker 4: Stay with us.

536
00:25:29,560 --> 00:25:40,199
Speaker 2: More from Bloomberg Surveillance coming up after this.

537
00:25:40,200 --> 00:25:44,120
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

538
00:25:44,160 --> 00:25:47,560
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

539
00:25:47,600 --> 00:25:50,399
Speaker 1: with the Bloomberg Business app. You can also watch us

540
00:25:50,440 --> 00:25:54,320
Speaker 1: live every weekday on YouTube and always on the Bloomberg Terminal.

541
00:25:54,560 --> 00:25:56,760
Speaker 2: Is about Lidan for Paul Sweeney this morning. That's a

542
00:25:56,760 --> 00:25:58,919
Speaker 2: good thing. Is about Lian for David Gerr. That's an

543
00:25:58,920 --> 00:26:02,199
Speaker 2: even better thing. Is about here this morning? And we

544
00:26:02,280 --> 00:26:06,399
Speaker 2: do newspapers. Lisa Manteo all night's been working on it.

545
00:26:06,400 --> 00:26:06,840
Speaker 4: What do you got.

546
00:26:07,200 --> 00:26:08,879
Speaker 10: Okay, I want to start with this because this is

547
00:26:08,920 --> 00:26:11,480
Speaker 10: about Amazon's Prime Vision. It's going to make its first

548
00:26:11,480 --> 00:26:14,879
Speaker 10: appearance in the UK tonight. Yes, it's for the first

549
00:26:14,960 --> 00:26:18,000
Speaker 10: round of the UEFA Champions League matches. The Tots will

550
00:26:18,000 --> 00:26:23,320
Speaker 10: be there, okay, villere playing exactly. That's why I put

551
00:26:23,320 --> 00:26:26,679
Speaker 10: it on you. So this is basically a feed for

552
00:26:26,760 --> 00:26:30,040
Speaker 10: football or soccer fans that's going to have data graphics

553
00:26:30,040 --> 00:26:32,760
Speaker 10: that pop up real time analysis on the screen. So

554
00:26:32,880 --> 00:26:35,480
Speaker 10: for example, the player's names, they're running s, beats, they're

555
00:26:35,560 --> 00:26:38,600
Speaker 10: jump heights, you know, all overlaid over the video screen.

556
00:26:38,640 --> 00:26:39,560
Speaker 5: The NHL does.

557
00:26:39,400 --> 00:26:42,560
Speaker 10: Something like this similar on there on their online and

558
00:26:42,680 --> 00:26:44,760
Speaker 10: they started it in twenty twenty two in the US

559
00:26:44,800 --> 00:26:47,160
Speaker 10: with the NFL and it really worked for them because

560
00:26:47,160 --> 00:26:48,720
Speaker 10: it attracted that younger audience.

561
00:26:49,200 --> 00:26:51,480
Speaker 6: So yes, exactly.

562
00:26:51,640 --> 00:26:55,560
Speaker 10: Because Amazon has a momentum bar that shows which team.

563
00:26:55,400 --> 00:26:56,840
Speaker 6: Is more likely to score next.

564
00:26:56,960 --> 00:26:59,680
Speaker 10: Right, so all these kind of things playing part, they're

565
00:26:59,680 --> 00:27:02,160
Speaker 10: saying that this is really gonna you know, they're trying

566
00:27:02,160 --> 00:27:02,840
Speaker 10: it out in the UK.

567
00:27:03,000 --> 00:27:03,720
Speaker 4: It's amazing.

568
00:27:03,760 --> 00:27:07,119
Speaker 2: As in our control room for Bloomberg Surveillance, they have

569
00:27:07,160 --> 00:27:07,960
Speaker 2: a moment.

570
00:27:10,080 --> 00:27:13,919
Speaker 11: The bar legs off pract and sends a message the

571
00:27:14,000 --> 00:27:18,560
Speaker 11: momentum is lacking. On the momentum Barli Isabelle, you could

572
00:27:18,640 --> 00:27:20,160
Speaker 11: jump in here on the newspapers.

573
00:27:20,760 --> 00:27:21,240
Speaker 5: I'm excited.

574
00:27:21,480 --> 00:27:23,320
Speaker 6: What Lisa, we'll talk about next? She sent us her

575
00:27:23,359 --> 00:27:23,800
Speaker 6: notes early.

576
00:27:23,960 --> 00:27:30,719
Speaker 4: Oh yeah, orientation for Bloomberg surveillance. Next.

577
00:27:30,840 --> 00:27:34,199
Speaker 10: Here it is Okay, this is Washington, d C's first

578
00:27:34,680 --> 00:27:36,200
Speaker 10: phone free bar.

579
00:27:36,440 --> 00:27:37,320
Speaker 5: It has opened up.

580
00:27:37,320 --> 00:27:37,600
Speaker 6: Okay.

581
00:27:37,600 --> 00:27:39,200
Speaker 5: It's called Hush Harbor.

582
00:27:39,520 --> 00:27:42,640
Speaker 10: And basically they want the owner wanted people to get

583
00:27:42,680 --> 00:27:44,399
Speaker 10: back to the old days, you know, when you actually

584
00:27:44,440 --> 00:27:47,520
Speaker 10: had conversations and listen to people and talk to them,

585
00:27:47,560 --> 00:27:49,320
Speaker 10: and a girl gave you your number and you had

586
00:27:49,359 --> 00:27:51,560
Speaker 10: to memorize it or write it down in a nap in,

587
00:27:51,720 --> 00:27:52,000
Speaker 10: you know.

588
00:27:52,080 --> 00:27:53,040
Speaker 5: Like that kind of thing.

589
00:27:53,320 --> 00:27:53,600
Speaker 4: Please.

590
00:27:53,640 --> 00:27:56,160
Speaker 10: So basically, you come in and you take your phone,

591
00:27:56,280 --> 00:27:58,240
Speaker 10: and the host gives you a little bag. You put

592
00:27:58,240 --> 00:28:01,600
Speaker 10: it vacuum sale it magnetized it, and you can't unlock

593
00:28:01,640 --> 00:28:02,560
Speaker 10: it until you leave.

594
00:28:02,880 --> 00:28:04,000
Speaker 5: Wow, that's the teation.

595
00:28:04,359 --> 00:28:07,560
Speaker 7: This is interesting because I've seen laptop free cafes, but

596
00:28:07,600 --> 00:28:09,720
Speaker 7: I think that's really meant for folks not to hog

597
00:28:09,760 --> 00:28:12,000
Speaker 7: the tables and so that they don't strived. Just six

598
00:28:12,040 --> 00:28:14,959
Speaker 7: dollars and three hours there without spending anything more. But

599
00:28:15,000 --> 00:28:17,959
Speaker 7: I like this because everyone is always on their phone.

600
00:28:18,000 --> 00:28:19,640
Speaker 7: Sometimes when I hang out with my friends, we say

601
00:28:19,640 --> 00:28:20,680
Speaker 7: put your phones in the middle.

602
00:28:21,000 --> 00:28:22,639
Speaker 6: Obviously that never happens to you.

603
00:28:22,720 --> 00:28:24,320
Speaker 4: It's tragic.

604
00:28:24,359 --> 00:28:26,000
Speaker 2: Somebody was saying to me, how do we set up

605
00:28:26,000 --> 00:28:28,760
Speaker 2: the structure for Bloomberg surveillance? And I said, you know,

606
00:28:28,880 --> 00:28:31,720
Speaker 2: some of it was longer interviews like Charlie Rose and

607
00:28:31,800 --> 00:28:34,119
Speaker 2: Chris Matthews and others, but a lot of it is

608
00:28:34,119 --> 00:28:36,680
Speaker 2: what Joe Scarborough invented over at Morning.

609
00:28:36,480 --> 00:28:38,680
Speaker 4: Joe, which is basically four.

610
00:28:38,440 --> 00:28:42,080
Speaker 2: People sitting in the student union at a given college

611
00:28:42,560 --> 00:28:47,280
Speaker 2: with no phones. Can you imagine student unions today with

612
00:28:47,440 --> 00:28:48,840
Speaker 2: cell phones to be terrible?

613
00:28:49,320 --> 00:28:49,760
Speaker 4: Brilliant?

614
00:28:49,840 --> 00:28:53,200
Speaker 10: One more, it was okay, Isabella, hear you're a bad

615
00:28:53,240 --> 00:28:54,680
Speaker 10: Bunny fan? Are you? Are you?

616
00:28:54,800 --> 00:28:56,080
Speaker 5: Maybe I like him.

617
00:28:56,080 --> 00:28:58,720
Speaker 7: I learned at him because he was Kendall Jenner's boyfriend.

618
00:28:58,720 --> 00:29:01,360
Speaker 6: You know, Kendall boyfriend.

619
00:29:01,400 --> 00:29:02,560
Speaker 5: Now they're so encouraged.

620
00:29:02,680 --> 00:29:05,360
Speaker 6: I love it, ex boyfriend, I love it.

621
00:29:05,440 --> 00:29:08,880
Speaker 5: Okay. So he had this residency concert right in Puerto Rico.

622
00:29:09,120 --> 00:29:11,920
Speaker 10: It's been going on the last one is on Saturday,

623
00:29:11,960 --> 00:29:14,520
Speaker 10: and some people, like my self, war fans haven't been

624
00:29:14,520 --> 00:29:16,240
Speaker 10: able to go see it. So Tom, I'm going to

625
00:29:16,280 --> 00:29:18,680
Speaker 10: play a little music here just because it gives me

626
00:29:18,720 --> 00:29:22,960
Speaker 10: an excuse to play it.

627
00:29:20,000 --> 00:29:20,800
Speaker 4: My love.

628
00:29:23,880 --> 00:29:25,920
Speaker 10: Okay, now I set the tone right, Okay.

629
00:29:25,920 --> 00:29:26,480
Speaker 1: So this is it.

630
00:29:27,320 --> 00:29:31,400
Speaker 10: So basically, on Saturday, it's the last concert and now

631
00:29:31,480 --> 00:29:35,120
Speaker 10: Amazon Prime is going to stream it live. It's going

632
00:29:35,160 --> 00:29:37,240
Speaker 10: to be there so everyone can now see it. So

633
00:29:37,320 --> 00:29:40,600
Speaker 10: whether you have Amazon Music, app, Prime Video, Twitch, it

634
00:29:40,680 --> 00:29:44,320
Speaker 10: starts at eight thirty pm Eastern on Amazon Prime or

635
00:29:44,360 --> 00:29:46,520
Speaker 10: any of those and you can watch it because people

636
00:29:46,560 --> 00:29:48,640
Speaker 10: haven't been able to go and travel and go see it,

637
00:29:48,720 --> 00:29:51,080
Speaker 10: so now everyone can enjoy the experience.

638
00:29:51,280 --> 00:29:54,000
Speaker 2: And this is this is like, yeah, this is another

639
00:29:54,120 --> 00:29:56,280
Speaker 2: leveraging in this that Lucas Shaw talks about.

640
00:29:56,280 --> 00:29:59,400
Speaker 7: It's screen time, but this is also smart because I

641
00:29:59,440 --> 00:30:02,320
Speaker 7: love how bad Bunny just really performed mostly in Puerto Rico.

642
00:30:02,360 --> 00:30:05,000
Speaker 7: He really wanted to celebrate the culture. He didn't perform

643
00:30:05,000 --> 00:30:07,640
Speaker 7: in the US, unlike all the big artists. Next he

644
00:30:07,680 --> 00:30:09,080
Speaker 7: will go to Latin America and Japan.

645
00:30:09,680 --> 00:30:11,840
Speaker 10: There was a reason why, because he was afraid of

646
00:30:12,040 --> 00:30:14,560
Speaker 10: ice agents coming and using as an opportunity to grass.

647
00:30:14,800 --> 00:30:17,280
Speaker 5: Oh yes, yes, and.

648
00:30:17,200 --> 00:30:19,560
Speaker 10: Some other artists have done the same thing.

649
00:30:20,480 --> 00:30:21,680
Speaker 4: So that's why he brought up We'll.

650
00:30:21,520 --> 00:30:24,000
Speaker 2: Talk about this later. I had this conversation last night

651
00:30:24,040 --> 00:30:27,520
Speaker 2: and it wasn't funny. Good morning across the nation newspapers

652
00:30:27,560 --> 00:30:31,080
Speaker 2: and Lisa Mantel, Yes you and we survived.

653
00:30:31,280 --> 00:30:36,120
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,

654
00:30:36,240 --> 00:30:40,520
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

655
00:30:40,680 --> 00:30:44,160
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

656
00:30:44,200 --> 00:30:48,240
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

657
00:30:48,280 --> 00:30:51,640
Speaker 1: can also watch us live every weekday on YouTube and

658
00:30:51,840 --> 00:30:53,560
Speaker 1: always on the Bloomberg terminal