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Speaker 2: Our Conversation of the Day in the equity market with
Speaker 2: Alisia Levine of BNY Prodigious Math Skills, and we're going
Speaker 2: to go to that right now for Global at Wall Street.
Speaker 2: I have never seen a market like this. What happened
Speaker 2: to Oracle last week? I know you don't do individual stocks.
Speaker 2: Never have I seen the jump condition we saw an Oracle.
Speaker 2: We are at Peter roorzag at Wizard is great about
Speaker 2: glide Pass. They all seem to be thrown out the window.
Speaker 2: How do we invest in a two part SMP five hundred.
Speaker 3: Look at what happened last week was extraordinary and it
Speaker 3: reignited never the excitement over the AI trade. And also
Speaker 3: that it's broadening. It's not just for the same time.
Speaker 4: You see it's broadening.
Speaker 5: I see it broaden.
Speaker 4: You and Jeff you agree on this.
Speaker 3: Yes, I see it broadening, and the market the market
Speaker 3: actually is broadening.
Speaker 6: I mean, that's the.
Speaker 3: Talk about small caps, and it's definitely indication the equally
Speaker 3: weighted SMP is at all time highs as well.
Speaker 4: I did not know that. Yes, let's the Alicia Levine magic.
Speaker 3: So there is a broadening here. But yes, the move
Speaker 3: last week was extraordinary. And you have seen a market
Speaker 3: like this, and it was in the late nineties, and
Speaker 3: the question is are we in ninety five or we
Speaker 3: in ninety Ok, let's go.
Speaker 4: There, let's rip it up. We're going to fundamental analysis
Speaker 4: right now. I'm sorry.
Speaker 2: It's radically different than the late nineties because of free
Speaker 2: cash flow general directions, they're actually am I right, there's
Speaker 2: not going to be twenty twenty seven. Oh they actually
Speaker 2: weren't making profits in twenty twenties.
Speaker 3: Okay, So on a relative basis, the tech stocks are
Speaker 3: cheaper than they were twenty five years ago. On a
Speaker 3: cash flow basis, they are just batting it out of
Speaker 3: the park on free cash flow margins. And on the
Speaker 3: operator you can.
Speaker 4: Say, Aaron Judge, you won't insulveank.
Speaker 3: So, I mean, these are different companies, but you know,
Speaker 3: keep the main point, the main point, which is that
Speaker 3: the FED is cutting into an increased earnings cycle. Okay,
Speaker 3: S and B earnings estimates are moving higher. The FED
Speaker 3: is cutting into it. Banks that are at are at
Speaker 3: all time highs.
Speaker 5: Hence the melt up is about lead with us here.
Speaker 7: There's interesting you say that the rally is brought in
Speaker 7: because we have critics saying and criticizing the fact that
Speaker 7: the top five stocks are driving twelve percent of the
Speaker 7: games this year. But given that we have Back of
Speaker 7: America releasing their fund manager survey, they said that equity
Speaker 7: allocation is at a seven month high. There's just a
Speaker 7: big jump in global growth optimism. But at the same
Speaker 7: time there's a record fifty eight percent saying that stocks
Speaker 7: are overvalued.
Speaker 6: How do you square those two?
Speaker 5: Well, because you have to be in the game.
Speaker 3: I mean, when you manage a live portfolio and you're
Speaker 3: under allocated and you're waiting for that S and P
Speaker 3: target of whatever, fifty eight hundred and it's not happening,
Speaker 3: you've got to get invested in.
Speaker 4: So far behind her.
Speaker 2: Active managers right now to Isabelle's great questions.
Speaker 3: So, I think in the US less they think they're
Speaker 3: less under allocated, but I think global managers are under
Speaker 3: allocated because the flee America conversation was everywhere. I actually
Speaker 3: wrote a piece about how ridiculous the Flea America trade is,
Speaker 3: because where where else are you going for innovation and
Speaker 3: global and growth and margins and earnings?
Speaker 2: Power is about Lee Actually read your piece, so you
Speaker 2: know is about lead with this folks, and for Paul
Speaker 2: Sweety today, I see your nefarious deed here you are
Speaker 2: asking questions of the equity giant Alicia Levine for your
Speaker 2: print stories today.
Speaker 4: I see what you're doing here.
Speaker 6: I always watch Alicia.
Speaker 7: She's such a smart talking head and she's also a
Speaker 7: fantastic female. We were just talking about shopping in France.
Speaker 7: But back to market.
Speaker 4: It's luxury back. Oh, it's a sector back.
Speaker 3: Luxury is back. Luxury is back. Look what's happened to
Speaker 3: household net worth? Okay, household net worth is up about
Speaker 3: seventy trillion dollars since the beginning of twenty twenty. That
Speaker 3: means households with financial assets housing and equities and socks
Speaker 3: and bonds and private equity are doing quite well.
Speaker 5: We have the case. We do have the K shaped
Speaker 5: consumer here, but we've had it.
Speaker 6: This is not new.
Speaker 3: What's happening is that the top three Quinn tiles are
Speaker 3: seeing their net worth growing, supporting consumption even in the
Speaker 3: face of a weaker labor market.
Speaker 7: Did you see that that, Tom, we have the most
Speaker 7: number of millionaires in New York than ever before, or
Speaker 7: something like that. I just know I'm working towards being
Speaker 7: one of them. But going back to luxury, how do
Speaker 7: you assess the health of American consumer? Do you look
Speaker 7: at luxury or mid tier or value? What is your
Speaker 7: favorite tier to look at?
Speaker 2: Well?
Speaker 3: Who luxury is everybody's favorite tier, let's just say that,
Speaker 3: but you really have to look at the mid range
Speaker 3: as well. We're going to get retail sales today, so
Speaker 3: we'll see where it's happening. I imagine there's some slow down.
Speaker 3: I think there is some anxiety in the labor market,
Speaker 3: particularly for the younger cohort and that's why the FED
Speaker 3: is cutting. But I'd say that, you know, for the
Speaker 3: most part, it's better than feared.
Speaker 5: Right, And the conversations had gotten so negative.
Speaker 3: I mean, we sat around this table, you know, the
Speaker 3: apocalypse in April, and you just invest right.
Speaker 4: Through the number one negative folks.
Speaker 2: Dana Telsea with this at eight twenty five, Alicia, if
Speaker 2: you want to stay around.
Speaker 4: For forty minutes in the green room. You can come
Speaker 4: in and do Dana Telsis.
Speaker 5: I love Data Telsa on luxury.
Speaker 4: But to speak of the gloom China flat on their back.
Speaker 2: And I believe we've got an equity lift in China
Speaker 2: and of course to Dana Telsea's luxury sector, that will
Speaker 2: bring a recovery there as a theory.
Speaker 3: Right right, and because there'll be more stimulus as well,
Speaker 3: they'll be more stimulus from the Chinese government.
Speaker 4: Let's get back to the bigger picture. What do people do?
Speaker 2: You go into a meeting for BNY and I can't
Speaker 2: imagine the percentage of the people that have missed this
Speaker 2: greater Christmas Eve twenty eighteen bull market.
Speaker 5: That's right, how do you catch up?
Speaker 3: So we always say it's time in the market and
Speaker 3: not timing the market. So if you're completely under allocated
Speaker 3: and you come to us with cash, we'd say do
Speaker 3: a full portfolio allocation over the next three to four months,
Speaker 3: so you know, one third, one third, one third or
Speaker 3: twenty five percent, twenty five percent and do a full
Speaker 3: portfolio allocation. Whatever your risk tolerance, whatever your growth uh,
Speaker 3: you know, goals are. That's what we would say, it's
Speaker 3: impossible to time the market. You know, strategy committees and
Speaker 3: investment committees everywhere. We're waiting for that equity pullback to
Speaker 3: bring on more risk, and it never happened.
Speaker 5: And what do we have.
Speaker 3: We had spreads at historic tights. We have equity markets
Speaker 3: making new highs every day and very hard to get in.
Speaker 3: So where are we today. We're broaching the sixty seven
Speaker 3: hundred price target on the SMP that was actually my
Speaker 3: price target for year end.
Speaker 5: We're there.
Speaker 3: I think the good news is in, can there be
Speaker 3: a selloff on the news on the Fed? Like the
Speaker 3: FED cuts are already in the market, so it's hard
Speaker 3: to play future FED cuts like it's there. That's why
Speaker 3: you've had this voracious rally in the last four weeks,
Speaker 3: really since August first, since that first terrible jobs report and.
Speaker 5: The revisions good one market.
Speaker 7: It's actually incredible how the price targets are being revised
Speaker 7: higher and higher. I want to talk about one concern
Speaker 7: you have in your note. You said it's the monetization
Speaker 7: of capex and hyperscalers.
Speaker 6: That seems so specific to me. Why is that your
Speaker 6: biggest concern?
Speaker 3: So, because it goes back to the concentration of what's
Speaker 3: happening in the S and P, the margins on the
Speaker 3: S and P and the pre cash flow margins and
Speaker 3: being driven by the hyperscalers.
Speaker 5: Right, So the large cab.
Speaker 3: Tech operating profit is twenty seven percent, that's double the
Speaker 3: rest of the SMP. If they keep on spending on
Speaker 3: the capex and at some point don't bring that to
Speaker 3: earnings or bring that to a revenue line, then you
Speaker 3: have to question whether this is going anywhere.
Speaker 5: We're not there yet.
Speaker 3: You're getting paid to wait, but you have to see
Speaker 3: the monetization of all that CAPEC spent. So you're starting
Speaker 3: to see it with Oracle right like it's starting to
Speaker 3: happen in other companies as well. The market will soon
Speaker 3: choose winners from the AI race. Don't know when that'll
Speaker 3: be a dislocation of sources. But overall, the main thing
Speaker 3: is the main thing. Growth is inflecting upwards, not downwards.
Speaker 3: For twenty twenty six, consumer stimulus is coming from the
Speaker 3: tax bill. The first quarter of twenty twenty six, the
Speaker 3: Fed is cutting and here.
Speaker 4: We are, Alicia, thank you so much. I'm serious.
Speaker 2: If you want to stay around for Dana Kelsey, please
Speaker 2: you know it'd be great. I mean, we can spend
Speaker 2: the whole show just on Dior. If you know there's
Speaker 2: two front doors to Dior on fifty seventh Street.
Speaker 6: I did not know that.
Speaker 2: One is where you go through with the visit of
Speaker 2: Hayford All and the others are Missus King goes through
Speaker 2: to be greeted back.
Speaker 5: We love well. I'll join Dana at your.
Speaker 4: Yeah Data at your Alicia Luvin. Thank you so much.
Speaker 4: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: Two hour conversation in the eight minutes, plus retail sales
Speaker 2: at eight thirty with Dana Telsea. It is an annual
Speaker 2: visit in celebration of how thick Bazarre Magazine is. For
Speaker 2: this September issue, how did Giorgio Armani change the corner
Speaker 2: of fifty seventh and fifth Avenue incredible?
Speaker 8: I mean, frankly, thank you for having me. Georgia Amani
Speaker 8: is to me is the one who brought luxury into
Speaker 8: the US on a European framework.
Speaker 2: He brought Europe to America day. Thank you, Richard gear
Speaker 2: I mean that's basically what happened.
Speaker 8: Yes, look at what he's developed, whether it is with stores,
Speaker 8: whether it's his whole be in terms of what it is,
Speaker 8: and yes, I think the later years were tougher than
Speaker 8: the beginning years, but there's always a place for ARMANI
Speaker 8: are you long luxury now?
Speaker 2: As China finally tanked, and so the luxury that's tanked
Speaker 2: is going to be a buying opportunity.
Speaker 8: I think it will be a buying opportunity over time.
Speaker 8: I don't think we're totally there yet. I still think
Speaker 8: you're having pressure points there. I think what you've seen
Speaker 8: is where anything's new and anything's innovative, consumers will purchase
Speaker 8: same old, same old.
Speaker 5: Doesn't happen these days.
Speaker 7: So Tom kept on talking about Dior and I really
Speaker 7: need to go in there, But for now, let's go
Speaker 7: to Tapestry. They had their investor a day last week.
Speaker 7: What were to takeaways that you got? How are the
Speaker 7: health of the American consumers through the lens of Tapestry.
Speaker 8: Through the lens of Tapestry. It was a very productive
Speaker 8: investor day. The outlook is solid for the next few years.
Speaker 8: I would say that the core Coach brand and the
Speaker 8: way that they've been able to put in different items
Speaker 8: of collections like Tabby and Brooklyn have made it appealing.
Speaker 8: Plus they're capturing the younger customer. Every brand today needs
Speaker 8: to always be able to market to capture new customers,
Speaker 8: keep the old, expand with the new.
Speaker 7: So Tapestry, there's Coach, there's Kate Spade, and it's the
Speaker 7: word Whitesman. I think there's gone with They're.
Speaker 8: Sold Strut Whitesman that was sold to Kolaris a couple
Speaker 8: of months ago.
Speaker 5: It's Coach and Kate Spade.
Speaker 8: The playbook of Coach is going to be applied to
Speaker 8: Kate Spade and let's see what happens going forward.
Speaker 7: What about Ralph Lauren they're having to investor day today.
Speaker 7: I feel like they say they're seeing revenue growth similar
Speaker 7: to reason rates over the next three years.
Speaker 6: So is that good or bad? How do you read?
Speaker 8: I think overall, when you think about Ralph Lauren and
Speaker 8: I'll be at their investor today, this day, today, this morning, I.
Speaker 6: Think it's good.
Speaker 8: I think how would you not want to go to?
Speaker 8: Both brand legacy and brand history hard to find, but
Speaker 8: Ralph Lauren, solid average unit retail price growth, You've got
Speaker 8: solid expansion of categories, whether it's women's, whether it's out ofwear,
Speaker 8: whether it's accessories. You've got global reach because frankly, in
Speaker 8: Asia they'll looked upon as.
Speaker 5: Higher end still in that body, Yes they are Asia,
Speaker 5: and they've expanded their customer base.
Speaker 4: Dana Telsea with a Telsey Advisor, a group.
Speaker 2: I can't say enough about what she's done for securities
Speaker 2: analysis in New York City. It is an annual kickoff
Speaker 2: visit for September economic data. Here in two minutes, Okay,
Speaker 2: I look at the entire thing and at gunpoint missus
Speaker 2: Keane made me watch the Anderson launch it Dior the
Speaker 2: other night, a video and it's all the beautiful people.
Speaker 2: I was looking for you in the third, second, third
Speaker 2: row there, Dana Telsea with you. I don't even know
Speaker 2: who the half the actors are that were there. Everybody's churning.
Speaker 2: Mister Arnault's there and you can see he's in a
Speaker 2: complete panic about the LVMH experiment.
Speaker 4: Is are they going to sell off the brands? That
Speaker 4: aren't working. Is that the new.
Speaker 8: New from that's I don't know if that's the new
Speaker 8: new for luxury and maybe for some of the accessible
Speaker 8: luxury brands.
Speaker 5: Look what you had just announced.
Speaker 8: Yesterday, v F Corps sold Dickie's workware, not a luxury brand.
Speaker 8: But you're seeing portfolio enhancement. You want to call a
Speaker 8: portfolio optimization. How do we get more from existing brands?
Speaker 2: All the control room is Dickie's luxury ware? Is that
Speaker 2: a luxury stock? I think Dickie's is a luxury stock,
Speaker 2: isn't it. Yeah they're saying, yeah, yeah it is. So
Speaker 2: there's a restructuring in fashion. Is it still aspirational where
Speaker 2: people want the stuff?
Speaker 5: Yes, it definitely is still abspirational.
Speaker 8: And you know what's changed these days when you have TikTok,
Speaker 8: when you have Instagram, seeing it on real people makes
Speaker 8: it accessible to all.
Speaker 7: And you're the one who told me that even if
Speaker 7: you can't afford the bags, you can afford the lipstick
Speaker 7: or the perfume, and that makes it fast exactly.
Speaker 8: Well, you heard about lvmah, the Louis Vuitton lipstick one
Speaker 8: hundred and sixty dollars.
Speaker 2: Let's come back and talk about the LVMH lipstick in
Speaker 2: one hundred and sixty dollars. We're a Dana Telsea this
Speaker 2: morning on Retail America, and you've got a revision where
Speaker 2: retail sales were revised higher. In the previous month. The
Speaker 2: control group was a zero point four statistic and it
Speaker 2: came in at a buoyant zero point seven. Some equity
Speaker 2: lift to the market and yields higher. Is well, where
Speaker 2: is it coming in retail? Is it big box retail?
Speaker 2: Walmart's just killing it? Is it a lost middle area
Speaker 2: or is it in the luxury area? Where's the retail
Speaker 2: pop that I see on the.
Speaker 5: Bloomberg st I think the retail prop is in value.
Speaker 8: The retail pop is with Walmart, it's with Costco, it's
Speaker 8: with the off pricers. You've seen a trading down of
Speaker 8: even higher end consumers and they're going to some of
Speaker 8: these value stores. And you saw it in second quarter earnings.
Speaker 8: Second quarter earnings which were reported the end of August
Speaker 8: essentially showed that even so far in the current quarter,
Speaker 8: sales are better than expected. Show them something new and
Speaker 8: they will buy.
Speaker 7: So then how do you assess the health of the
Speaker 7: consumer when it comes to big box retail is like
Speaker 7: Walmart or Target. We've seen a divergence quite recently, right,
Speaker 7: and that was surprising to me because I usually clump
Speaker 7: them in one yep.
Speaker 8: One of the differences there's basically micro relative to the company.
Speaker 8: Target has worked to do to improve their assortment, to
Speaker 8: improve their operations. There's a lot of store standards that
Speaker 8: need to be adjusted. Walmart is hitting on all cylinders
Speaker 8: and is taking share.
Speaker 4: Well, they have a forty multiple. How does Joe Feldman,
Speaker 4: your colleague, respond to a single digit revenue growth? Making
Speaker 4: solid but you know, normal retail profits trading it a
Speaker 4: pe of forty. That's not in my textbook.
Speaker 5: It's not in the textbook.
Speaker 8: But the consistency of it, the market share gains that
Speaker 8: they have, the pricing that they offer, the value that
Speaker 8: they offer.
Speaker 5: They unique in the world of retail.
Speaker 7: Which companies are best positioned to absorb higher cast when
Speaker 7: it comes to this entire tire regime, and I suspect
Speaker 7: there might be a lot the top of mind, Can
Speaker 7: you name maybe two?
Speaker 8: Well, I think of companies that can absorb pricing, pricing.
Speaker 8: The off pricers can absorb pricing because they're the umbrella
Speaker 8: for everyone else, So TJX, the Ross of Burlington, and
Speaker 8: of course.
Speaker 7: Walmart Burlington socks. I always that was the socks they
Speaker 7: were when I was little.
Speaker 2: Are they passing? Are they passing on tariff? Say at
Speaker 2: TJ Max.
Speaker 5: You're beginning to see teriffs be passed on.
Speaker 8: But it all starts from if the full price retailer
Speaker 8: passes on, then it goes to others. Also, it's expected
Speaker 8: that price increases, for the most part, will come fully
Speaker 8: into play in the fourth quarter.
Speaker 2: One final question I got to ask, and I guess
Speaker 2: it's you know, I got to go to the New
Speaker 2: York City Angle a couple of years on. Is Tiffany
Speaker 2: worked out for mister Arnault.
Speaker 5: I think it is working out.
Speaker 8: They're getting more traffic, they're getting new designs. The new
Speaker 8: stores that they've remodeled have given a lift that they
Speaker 8: want't have seen before.
Speaker 4: Are they still popping? In Japan? And I stood outside
Speaker 4: the Tiffany's store there in.
Speaker 8: The Did you see the news store on the on
Speaker 8: the Ginza that has the blue outside?
Speaker 4: Yeah?
Speaker 5: Pretty yeah.
Speaker 2: We supposed to fly over and look at it. And
Speaker 2: I'm like, no, I don't think so okay. And finally
Speaker 2: Isabelle was talking about this earlier. The Deer's Store is spectacular.
Speaker 2: Is that going to be the future of European investment
Speaker 2: in the island of Manhattan.
Speaker 4: Is to do a door part of it?
Speaker 8: Yes, I think for the ultra luxury companies, and that
Speaker 8: do your Store is going to be replicated in Beverly
Speaker 8: Hills because that one's opening in just a couple.
Speaker 4: Of weeks after Lucas show. Will want to know about that.
Speaker 2: Danny Telsey brilliant always in September important. She's with a
Speaker 2: Telsea advisory group with Joe Feldman on Big Box Stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
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Speaker 4: This is a joy as you get the markets open
Speaker 4: here at today. We usually talked to her by batphone.
Speaker 4: You know about the zoom out to Hollywood and Los Angeles.
Speaker 2: Lisa Crawford is how to securitized research at TCW.
Speaker 4: I got to ask you one question.
Speaker 2: There's double majors in America, and I give Warden great
Speaker 2: credit for really to me doing the first double major.
Speaker 2: But Yale around Jonathan Spence and China's Studies and all
Speaker 2: that piece together a double major years ago called Political
Speaker 2: Science and International Studies, which is just phenomenal.
Speaker 4: What was it like doing a double barreled thing at Yale?
Speaker 5: Absolutely?
Speaker 9: So, I chose international studies because I was raised to
Speaker 9: be a citizen of the world by my dad's We
Speaker 9: moved around a decent amount that was important to me
Speaker 9: that was only offered as a second major. So I
Speaker 9: originally had econ for my primary Maidie Sure. Then I
Speaker 9: looked up and I had a four point zero and POLYCI,
Speaker 9: So I decided I'd be POLYCI for my first major.
Speaker 2: So you you you you changed your major because Schiller
Speaker 2: gave you a quality C.
Speaker 9: I changed my major because I started applying to finance
Speaker 9: jobs and it looked more competitive to have a higher
Speaker 9: GPA for your for your primary.
Speaker 4: Ruthless, What a modern discussion. I mean, it's just does
Speaker 4: everybody get a's today? Is there anybody get a B anymore?
Speaker 6: I don't know.
Speaker 7: I don't know any young folks, but some are doing
Speaker 7: past fail pass fail.
Speaker 2: Don't get me going lazy craft for this or thrilled.
Speaker 2: She's in studio with us and it's on the fixed
Speaker 2: income market. How is your world of trust company the West?
Speaker 2: How is securitized research linked to the Fed?
Speaker 5: Oh? Absolutely so.
Speaker 9: Rates are obviously very important in multiple ways. I'll touch
Speaker 9: on too. So first and foremost, we've seen a nice
Speaker 9: rally and treasury and that's been beneficial for the agency
Speaker 9: mortage backed securities market and a lot of our positioning there.
Speaker 5: You've got current coupon spreads.
Speaker 9: Around high one tens right now versus that was as
Speaker 9: wide as kind of one nineties area late twenty twenty
Speaker 9: three before the Fed signals they were pressing.
Speaker 4: So I've yeeled down to perfection.
Speaker 6: It's beautiful.
Speaker 7: How do you expect refinancing risks to evolve though in
Speaker 7: this year landscape?
Speaker 6: Given the higher interest rate?
Speaker 9: Sure on the commercial real estate side, we've had a
Speaker 9: great market to take advantage of for the last few
Speaker 9: years because of the dislocation from higher rates higher rates,
Speaker 9: it's established a bit of a K shaped recovery. So
Speaker 9: weaker assets that have seen significant value decline and have
Speaker 9: leverage beyond the asset value. You're seeing sponsors strategically walk,
Speaker 9: and then you're seeing sponsors remain committed to working through
Speaker 9: some of their over lever debt for their quality assets
Speaker 9: that remain core in their portfolios.
Speaker 6: Let's not jump to asset backs.
Speaker 7: Find us because your notes were really robust that this
Speaker 7: space is not something I'm super inexpret in, but your
Speaker 7: notes are very helpful.
Speaker 6: So in the ABF space, what.
Speaker 7: Are some opportunities you're seeing and quote the different flavors
Speaker 7: of profile when it comes to that, any key risks
Speaker 7: in mind for sure.
Speaker 9: So the acid back finance is the new term that
Speaker 9: everyone likes to use for less liquid securitized exposure, and
Speaker 9: we've always used it as a tool in our toolkit,
Speaker 9: whether it's to pick up incremental spread or scale access
Speaker 9: loans for better capital treatment for some investors. And then
Speaker 9: now we're seeing more of our acid allocator clients focus
Speaker 9: on dedicated exposure. They're typically trying to solve for better
Speaker 9: diversification in their portfolios, less mark to market volatility, higher
Speaker 9: yield profiles as well. So it's a really fun time
Speaker 9: to deliver solutions into them.
Speaker 4: Yeah, that's what they said in two thousand and six.
Speaker 2: Remember your clos and colos, squares and all that under
Speaker 2: whatever you said, asset based whatever. Give us an example.
Speaker 2: Is it like aircraft leasing or tractor trailers?
Speaker 9: Yeah, so if I were to buy a collateral pool
Speaker 9: of aircraft loans or exposure to aircraft leases in a less
Speaker 9: liquid form, we could call that acid backed finans. You
Speaker 9: also see asset back finance active in fund finance more broadly,
Speaker 9: whether that's net asset value loans or subscription.
Speaker 4: Line loans killing me.
Speaker 5: I know, I know. Secure size is so fun.
Speaker 9: Yes, And then you'll also see things like syndicated warehouse.
Speaker 9: I thought you might appreciate that as well, and you
Speaker 9: can add structure to that.
Speaker 4: Syndicated where else they play toads in New Haven?
Speaker 2: Back when you're there where Eliza Crawford, she's with Trust
Speaker 2: Company of the West tc W. Mark Pittman owned your
Speaker 2: world for Bloomberg. He won every award out there. His
Speaker 2: death was far too soon for all of us at Bloomberg.
Speaker 2: Mark Pittman would ask this question today, where are the
Speaker 2: shadows within the belief, the faith, the intellectual reach to
Speaker 2: do securitized finance where's the worry points like in two
Speaker 2: thousand and six.
Speaker 9: Yes, so we're always mindful about what the underlying cash
Speaker 9: flows look like and what the principal value of anything
Speaker 9: we're lending on is. And so when you get into
Speaker 9: too much structural complexity, you need to very sharp on
Speaker 9: figuring out what your rights are, what your cash flows
Speaker 9: look like in your ultimate return on investment. So that's ongoing,
Speaker 9: and so there are creative structures out there that don't
Speaker 9: make sense.
Speaker 2: So critically David Goldbenex Bank of America was iconic on this.
Speaker 2: It's a study of trunches. Yeah, where is the trunch risk?
Speaker 4: Now?
Speaker 2: Is it the garbage at the bottom of the deck
Speaker 2: or is it trunch risk in the price to perfection area?
Speaker 9: It's really more I frame it more the bottom of
Speaker 9: the capital structure. So there's especially when we think about
Speaker 9: less liquid or if you call that shadows. You've got
Speaker 9: plenty of things that are considered private ig and private
Speaker 9: investment grade, and those are very high quality. But if
Speaker 9: you are to take something that might have a little
Speaker 9: more operational risk, or it might have a little more
Speaker 9: market risk than expected, and you trunch that up and
Speaker 9: you're taking first loss risk.
Speaker 5: You are exposed if.
Speaker 9: Something goes wrong with that originator or that collateral profile,
Speaker 9: that idiosyncratic risk, so you're exposed.
Speaker 4: I was younger in two thousand and six. It's the
Speaker 4: same kindsation.
Speaker 7: Continue in your note this got my interest. You talked
Speaker 7: about digital infrastructure. So within structured finance, do you think
Speaker 7: that digital infrastructure securitization will become a permanent asset class.
Speaker 5: I do think it will be. We've seen it grow.
Speaker 9: I think the first asset backed security was twenty eighteen,
Speaker 9: the first commercial MORGE backed security was twenty twenty two.
Speaker 9: There's so much need for in particular data center financing,
Speaker 9: that it's going to come through every debt pipe in
Speaker 9: the market. And then that being said, we're mindful for
Speaker 9: two reasons. One, there are better profiles and weaker profiles
Speaker 9: and different ways to take advantage of the market. And
Speaker 9: then additionally, the supply serge should at some point put
Speaker 9: some pressure on spreads. We would anticipate that, So we're
Speaker 9: also mindful about relative value private credit.
Speaker 2: Is there a leverage in there hidden that we don't see,
Speaker 2: that we don't know?
Speaker 9: All speak to the asset backside of private credit and
Speaker 9: the leverage that you might that might be more blatant.
Speaker 9: Is more of that kind of warehouse financing. Right, Ultimately,
Speaker 9: warehouse is levered profile.
Speaker 4: So can you use the word mezzanine.
Speaker 9: Yes, and mezzanine is live and well and so really
Speaker 9: it's picking your spots for the collateral profile that you're
Speaker 9: you've got some sort of exposure to and feeling high
Speaker 9: conviction about both the performance of that collateral and then
Speaker 9: your rights upon an event of default or some type
Speaker 9: of distress in the performance.
Speaker 4: Eliza, thank you so much. LESA.
Speaker 2: Crawford is of Securitized Research at TCW.
Speaker 4: Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
Speaker 1: live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 2: Is about Lidan for Paul Sweeney this morning. That's a
Speaker 2: good thing. Is about Lian for David Gerr. That's an
Speaker 2: even better thing. Is about here this morning? And we
Speaker 2: do newspapers. Lisa Manteo all night's been working on it.
Speaker 4: What do you got.
Speaker 10: Okay, I want to start with this because this is
Speaker 10: about Amazon's Prime Vision. It's going to make its first
Speaker 10: appearance in the UK tonight. Yes, it's for the first
Speaker 10: round of the UEFA Champions League matches. The Tots will
Speaker 10: be there, okay, villere playing exactly. That's why I put
Speaker 10: it on you. So this is basically a feed for
Speaker 10: football or soccer fans that's going to have data graphics
Speaker 10: that pop up real time analysis on the screen. So
Speaker 10: for example, the player's names, they're running s, beats, they're
Speaker 10: jump heights, you know, all overlaid over the video screen.
Speaker 5: The NHL does.
Speaker 10: Something like this similar on there on their online and
Speaker 10: they started it in twenty twenty two in the US
Speaker 10: with the NFL and it really worked for them because
Speaker 10: it attracted that younger audience.
Speaker 6: So yes, exactly.
Speaker 10: Because Amazon has a momentum bar that shows which team.
Speaker 6: Is more likely to score next.
Speaker 10: Right, so all these kind of things playing part, they're
Speaker 10: saying that this is really gonna you know, they're trying
Speaker 10: it out in the UK.
Speaker 4: It's amazing.
Speaker 2: As in our control room for Bloomberg Surveillance, they have
Speaker 2: a moment.
Speaker 11: The bar legs off pract and sends a message the
Speaker 11: momentum is lacking. On the momentum Barli Isabelle, you could
Speaker 11: jump in here on the newspapers.
Speaker 5: I'm excited.
Speaker 6: What Lisa, we'll talk about next? She sent us her
Speaker 6: notes early.
Speaker 4: Oh yeah, orientation for Bloomberg surveillance. Next.
Speaker 10: Here it is Okay, this is Washington, d C's first
Speaker 10: phone free bar.
Speaker 5: It has opened up.
Speaker 6: Okay.
Speaker 5: It's called Hush Harbor.
Speaker 10: And basically they want the owner wanted people to get
Speaker 10: back to the old days, you know, when you actually
Speaker 10: had conversations and listen to people and talk to them,
Speaker 10: and a girl gave you your number and you had
Speaker 10: to memorize it or write it down in a nap in,
Speaker 10: you know.
Speaker 5: Like that kind of thing.
Speaker 4: Please.
Speaker 10: So basically, you come in and you take your phone,
Speaker 10: and the host gives you a little bag. You put
Speaker 10: it vacuum sale it magnetized it, and you can't unlock
Speaker 10: it until you leave.
Speaker 5: Wow, that's the teation.
Speaker 7: This is interesting because I've seen laptop free cafes, but
Speaker 7: I think that's really meant for folks not to hog
Speaker 7: the tables and so that they don't strived. Just six
Speaker 7: dollars and three hours there without spending anything more. But
Speaker 7: I like this because everyone is always on their phone.
Speaker 7: Sometimes when I hang out with my friends, we say
Speaker 7: put your phones in the middle.
Speaker 6: Obviously that never happens to you.
Speaker 4: It's tragic.
Speaker 2: Somebody was saying to me, how do we set up
Speaker 2: the structure for Bloomberg surveillance? And I said, you know,
Speaker 2: some of it was longer interviews like Charlie Rose and
Speaker 2: Chris Matthews and others, but a lot of it is
Speaker 2: what Joe Scarborough invented over at Morning.
Speaker 4: Joe, which is basically four.
Speaker 2: People sitting in the student union at a given college
Speaker 2: with no phones. Can you imagine student unions today with
Speaker 2: cell phones to be terrible?
Speaker 4: Brilliant?
Speaker 10: One more, it was okay, Isabella, hear you're a bad
Speaker 10: Bunny fan? Are you? Are you?
Speaker 5: Maybe I like him.
Speaker 7: I learned at him because he was Kendall Jenner's boyfriend.
Speaker 6: You know, Kendall boyfriend.
Speaker 5: Now they're so encouraged.
Speaker 6: I love it, ex boyfriend, I love it.
Speaker 5: Okay. So he had this residency concert right in Puerto Rico.
Speaker 10: It's been going on the last one is on Saturday,
Speaker 10: and some people, like my self, war fans haven't been
Speaker 10: able to go see it. So Tom, I'm going to
Speaker 10: play a little music here just because it gives me
Speaker 10: an excuse to play it.
Speaker 4: My love.
Speaker 10: Okay, now I set the tone right, Okay.
Speaker 1: So this is it.
Speaker 10: So basically, on Saturday, it's the last concert and now
Speaker 10: Amazon Prime is going to stream it live. It's going
Speaker 10: to be there so everyone can now see it. So
Speaker 10: whether you have Amazon Music, app, Prime Video, Twitch, it
Speaker 10: starts at eight thirty pm Eastern on Amazon Prime or
Speaker 10: any of those and you can watch it because people
Speaker 10: haven't been able to go and travel and go see it,
Speaker 10: so now everyone can enjoy the experience.
Speaker 2: And this is this is like, yeah, this is another
Speaker 2: leveraging in this that Lucas Shaw talks about.
Speaker 7: It's screen time, but this is also smart because I
Speaker 7: love how bad Bunny just really performed mostly in Puerto Rico.
Speaker 7: He really wanted to celebrate the culture. He didn't perform
Speaker 7: in the US, unlike all the big artists. Next he
Speaker 7: will go to Latin America and Japan.
Speaker 10: There was a reason why, because he was afraid of
Speaker 10: ice agents coming and using as an opportunity to grass.
Speaker 5: Oh yes, yes, and.
Speaker 10: Some other artists have done the same thing.
Speaker 4: So that's why he brought up We'll.
Speaker 2: Talk about this later. I had this conversation last night
Speaker 2: and it wasn't funny. Good morning across the nation newspapers
Speaker 2: and Lisa Mantel, Yes you and we survived.
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 1: can also watch us live every weekday on YouTube and
Speaker 1: always on the Bloomberg terminal