1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,080 --> 00:00:05,280 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moven news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:20,880 --> 00:00:24,079 Speaker 1: Madison Mills Paul Sweeney here in the Bloomberg Interactor Broker's studio. 8 00:00:24,120 --> 00:00:27,480 Speaker 1: Time for little tech talk, So we turned to Ashley Still, 9 00:00:27,720 --> 00:00:31,200 Speaker 1: senior vice president and general manager, where the creative cloud 10 00:00:31,240 --> 00:00:33,440 Speaker 1: and document cloud at a little tech firm. You might 11 00:00:33,479 --> 00:00:36,960 Speaker 1: have heard of Adobe. So Ashley, we can talk about 12 00:00:37,000 --> 00:00:39,400 Speaker 1: the cloud because that was the cool kid on the 13 00:00:39,400 --> 00:00:42,720 Speaker 1: block until about a month ago, and then this thing 14 00:00:42,800 --> 00:00:45,559 Speaker 1: AI came out of nowhere. At least that's how it 15 00:00:45,600 --> 00:00:49,320 Speaker 1: seems to me. And now that's all anybody can talk about. 16 00:00:49,600 --> 00:00:52,479 Speaker 1: I would love to get your based upon your background 17 00:00:52,680 --> 00:00:56,920 Speaker 1: in tech technology, kind of what you believe AI is 18 00:00:58,440 --> 00:00:59,640 Speaker 1: and what it can be. 19 00:01:02,040 --> 00:01:04,800 Speaker 3: Well, first, thank you for having me. Really appreciate being 20 00:01:04,840 --> 00:01:08,720 Speaker 3: on the show and talking with you today. So yes, 21 00:01:08,800 --> 00:01:11,920 Speaker 3: I mean AI has been around for actually a long time, 22 00:01:12,880 --> 00:01:21,120 Speaker 3: But certainly the technology is rapidly accelerating. And one of 23 00:01:21,160 --> 00:01:25,679 Speaker 3: the things that changed is kind of the methodologies and 24 00:01:26,240 --> 00:01:31,520 Speaker 3: being used in AI, where increasingly the algorithms can kind 25 00:01:31,520 --> 00:01:39,000 Speaker 3: of produce content on their own versus historically more automating 26 00:01:39,080 --> 00:01:42,720 Speaker 3: repetitive tasks. So in the case of images, obviously you 27 00:01:42,720 --> 00:01:45,880 Speaker 3: think of Adobe, you tink of creativity. In the case 28 00:01:45,880 --> 00:01:50,880 Speaker 3: of images, it's now possible to create content just by 29 00:01:51,040 --> 00:01:55,640 Speaker 3: simply writing text prompts. So if you want to read balloon, right, 30 00:01:55,720 --> 00:02:01,520 Speaker 3: you can just the technology can basically imagine, if you will, 31 00:02:01,760 --> 00:02:05,760 Speaker 3: a red balloon for you, and and that is been 32 00:02:05,800 --> 00:02:08,839 Speaker 3: advancing pretty rapidly over the past few years. 33 00:02:09,560 --> 00:02:12,200 Speaker 4: Ashley, you're you're the perfect person to talk to you 34 00:02:12,280 --> 00:02:15,200 Speaker 4: about this. You're a former corporate finance analyst. Can you 35 00:02:15,480 --> 00:02:18,919 Speaker 4: talk to me about the calculation for some of these 36 00:02:18,960 --> 00:02:23,760 Speaker 4: companies that are reallocating their budgets to throw money at AI. 37 00:02:24,040 --> 00:02:25,920 Speaker 4: How do you rate that decision? 38 00:02:28,200 --> 00:02:33,040 Speaker 3: Well, certainly, Todobe. I mean, we believe that it's incredibly 39 00:02:33,040 --> 00:02:38,200 Speaker 3: innovative technology that will help make our products better for 40 00:02:38,320 --> 00:02:42,200 Speaker 3: existing users and help us actually expand who can use 41 00:02:42,240 --> 00:02:47,120 Speaker 3: our product. So the example that I just gave where 42 00:02:47,600 --> 00:02:52,800 Speaker 3: you can now create content using simple text prompts that's 43 00:02:53,000 --> 00:02:57,160 Speaker 3: much more accessible than going, you know, to design school 44 00:02:57,240 --> 00:03:03,000 Speaker 3: and learning sophisticated applications and tools. But it also makes 45 00:03:03,080 --> 00:03:06,839 Speaker 3: the sophisticated applications and tools like Photoshop better and more 46 00:03:06,919 --> 00:03:11,000 Speaker 3: powerful for the creative professionals. And it's unusual when you 47 00:03:11,040 --> 00:03:14,800 Speaker 3: have a technology that both expands your market opportunity but 48 00:03:14,960 --> 00:03:18,160 Speaker 3: also makes your products better and more valuable for your 49 00:03:18,200 --> 00:03:22,040 Speaker 3: existing customers. And that's why we're excited about generative AI. 50 00:03:22,560 --> 00:03:26,160 Speaker 1: So how do you, I guess, integrate generative AI into 51 00:03:26,160 --> 00:03:29,560 Speaker 1: what you're doing at Adobe? I mean, is this something 52 00:03:29,600 --> 00:03:33,240 Speaker 1: that you guys have I guess maybe stepped up investment 53 00:03:33,280 --> 00:03:35,400 Speaker 1: in time and effort and money over the last year two. 54 00:03:35,400 --> 00:03:36,960 Speaker 1: How's that developed for you guys? 55 00:03:37,680 --> 00:03:37,960 Speaker 5: Sure? 56 00:03:38,040 --> 00:03:41,200 Speaker 3: Absolutely, I mean we've been investing in AI for a 57 00:03:41,280 --> 00:03:46,119 Speaker 3: decade at least, but certainly we've been ramping up our 58 00:03:46,200 --> 00:03:48,640 Speaker 3: efforts around gender AI. And there's a couple of things 59 00:03:48,640 --> 00:03:52,119 Speaker 3: that we're doing. We announced incredibly exciting and very well 60 00:03:52,160 --> 00:03:57,400 Speaker 3: received update to Photoshop last week. So we introduced a 61 00:03:57,440 --> 00:04:01,880 Speaker 3: new beta a Photoshop where there's feature called generative Pill 62 00:04:02,560 --> 00:04:07,640 Speaker 3: and this enables you to add, remove and extend your 63 00:04:07,760 --> 00:04:12,520 Speaker 3: content in Photoshop again using simple text prompts. It's all 64 00:04:12,600 --> 00:04:15,880 Speaker 3: non destructive. So again this is the power of Photoshop 65 00:04:16,279 --> 00:04:19,560 Speaker 3: where you can accelerate your work and kind of have 66 00:04:19,680 --> 00:04:26,200 Speaker 3: new ideas and explore creative possibilities in a really kind 67 00:04:26,200 --> 00:04:30,719 Speaker 3: of low risk, so to speak way, and just have 68 00:04:30,800 --> 00:04:33,840 Speaker 3: a lot of fun. So we've had seventy million images 69 00:04:33,960 --> 00:04:37,880 Speaker 3: generated in Photoshop over the last week alone in a 70 00:04:37,920 --> 00:04:41,960 Speaker 3: beta application, and again the response from our community has 71 00:04:41,960 --> 00:04:46,800 Speaker 3: been fantastic. We also introduced an entirely new experience called 72 00:04:46,800 --> 00:04:50,960 Speaker 3: Adobe Firefly, and you know, anyone can access this on 73 00:04:51,720 --> 00:04:55,239 Speaker 3: firefly dot Adobe dot com. So go check out the website. 74 00:04:55,240 --> 00:05:00,400 Speaker 3: It's completely free and there you can anyone and world 75 00:05:00,440 --> 00:05:04,680 Speaker 3: with access to a browser can create content again just 76 00:05:05,240 --> 00:05:10,039 Speaker 3: typing in simple text prompts and really just have a 77 00:05:10,040 --> 00:05:10,560 Speaker 3: ton of fun. 78 00:05:11,520 --> 00:05:15,680 Speaker 4: And Adobe offers the creative cloud across a lot of platforms, 79 00:05:15,720 --> 00:05:18,599 Speaker 4: from desktop to of course mobile. And one of the 80 00:05:18,600 --> 00:05:21,680 Speaker 4: big AI questions is how we're going to get the 81 00:05:21,880 --> 00:05:24,640 Speaker 4: juice we need for lack of a better term, on 82 00:05:24,680 --> 00:05:28,839 Speaker 4: our phones to power the AI tools that are going 83 00:05:28,880 --> 00:05:31,320 Speaker 4: to be made available to us. Is that something that 84 00:05:31,320 --> 00:05:33,799 Speaker 4: you all are thinking about Adobe when you think about 85 00:05:33,880 --> 00:05:35,400 Speaker 4: AI questions. 86 00:05:36,920 --> 00:05:40,680 Speaker 3: Absolutely, you know, and we actually on the document cloud side, 87 00:05:41,400 --> 00:05:44,320 Speaker 3: we have a very powerful AI model called liquid Mode 88 00:05:44,360 --> 00:05:49,040 Speaker 3: that's inside of Acrobat on mobile devices, both on iOS 89 00:05:49,040 --> 00:05:52,680 Speaker 3: and Android, and that actually takes any PDF that's been 90 00:05:52,680 --> 00:05:55,960 Speaker 3: created in the thirty year history of PDF and basically 91 00:05:56,000 --> 00:05:59,440 Speaker 3: reformats it so you can read it on a phone. Right. 92 00:05:59,480 --> 00:06:04,440 Speaker 3: It takes what would have otherwise been rendered, as you know, 93 00:06:04,440 --> 00:06:06,120 Speaker 3: an eight and a half by eleven piece of paper 94 00:06:06,120 --> 00:06:10,839 Speaker 3: which is unreadable, and basically reflows it into an HTML 95 00:06:10,880 --> 00:06:15,000 Speaker 3: experience magically on your device. And so these devices are 96 00:06:15,040 --> 00:06:19,680 Speaker 3: incredibly powerful. Certainly, technology always, you know, raises the bar, 97 00:06:20,760 --> 00:06:23,680 Speaker 3: but we work closely with you know, folks like Google 98 00:06:23,720 --> 00:06:28,120 Speaker 3: and Apple to constantly improve what's possible on devices. 99 00:06:28,360 --> 00:06:31,920 Speaker 1: So Ashley, again you mentioned and we've heard from all 100 00:06:31,920 --> 00:06:34,880 Speaker 1: this artificial intelligence has obviously been around for a while, 101 00:06:34,920 --> 00:06:37,600 Speaker 1: but it just feels like maybe it's just the Nvidia, 102 00:06:38,160 --> 00:06:40,479 Speaker 1: you know, raising their their outlooks so dramatically and the 103 00:06:40,480 --> 00:06:43,480 Speaker 1: big increase in market capitalization that they saw and in 104 00:06:43,600 --> 00:06:46,440 Speaker 1: their company that maybe it's just come to everybody's attention 105 00:06:46,600 --> 00:06:49,159 Speaker 1: right now. But almost every single company in Y S 106 00:06:49,160 --> 00:06:50,960 Speaker 1: and P five hundred and on their last earnings call 107 00:06:51,000 --> 00:06:53,760 Speaker 1: mentioned AI. So I'm wondering, from your perspective, as you 108 00:06:53,920 --> 00:06:56,119 Speaker 1: have been working with it for a long time, within 109 00:06:56,240 --> 00:06:59,240 Speaker 1: the creative cloud and the document cloud, what's the biggest 110 00:06:59,320 --> 00:07:02,400 Speaker 1: risk to I guess just AI and the development of AI. 111 00:07:02,480 --> 00:07:06,440 Speaker 3: Do you think, Well, one of the risks that we're 112 00:07:07,120 --> 00:07:09,680 Speaker 3: very focused on and kind of passionate about is the 113 00:07:09,760 --> 00:07:14,240 Speaker 3: risk for misinformation. And you know, there's a lot of 114 00:07:14,400 --> 00:07:18,480 Speaker 3: trust that we all put in content. When we see 115 00:07:18,480 --> 00:07:21,920 Speaker 3: an image that's you know, on a news site or 116 00:07:21,960 --> 00:07:25,119 Speaker 3: even you know, shared by family, there's there's a certain 117 00:07:25,160 --> 00:07:27,360 Speaker 3: amount of trust that you have to have and how 118 00:07:27,400 --> 00:07:31,320 Speaker 3: that content was created. And we feel strongly again just 119 00:07:31,800 --> 00:07:35,200 Speaker 3: based on the pace of change and innovation in AI 120 00:07:35,280 --> 00:07:38,480 Speaker 3: right now, that we all need what we refer to 121 00:07:38,520 --> 00:07:41,760 Speaker 3: as nutrition labels for content. We're part of about a 122 00:07:41,920 --> 00:07:47,680 Speaker 3: thousand member Consortius and open standard that's developing content credentials. 123 00:07:47,720 --> 00:07:50,040 Speaker 3: Think of this again as a nutrition label for content, 124 00:07:50,640 --> 00:07:54,720 Speaker 3: and we really believe consumers need this information so that 125 00:07:54,720 --> 00:07:55,960 Speaker 3: we can trust what we see. 126 00:07:56,240 --> 00:07:58,720 Speaker 1: YEP, very very important and that will be a challenge 127 00:07:58,840 --> 00:08:02,200 Speaker 1: going forward, no doubt. Ashley Still, Senior Vice president and 128 00:08:02,240 --> 00:08:05,320 Speaker 1: general manager of the Creative Cloud and the document Cloud 129 00:08:05,400 --> 00:08:09,080 Speaker 1: at Adobe, one of the leading tech companies based in 130 00:08:09,160 --> 00:08:15,120 Speaker 1: San Jose, California, talking about the Cloud AI. It's everywhere, folks, 131 00:08:15,560 --> 00:08:16,600 Speaker 1: this is Bloomberg. 132 00:08:17,840 --> 00:08:21,280 Speaker 6: You're listening to the team Ken's are Live program Bloomberg 133 00:08:21,320 --> 00:08:24,680 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com, 134 00:08:24,760 --> 00:08:27,920 Speaker 6: the iHeartRadio app and the Bloomberg Business App, or listen 135 00:08:28,000 --> 00:08:30,280 Speaker 6: on demand wherever you get your podcasts. 136 00:08:32,320 --> 00:08:34,920 Speaker 1: Let's talk markets here, Let's talk fixed income. We talked 137 00:08:34,960 --> 00:08:37,880 Speaker 1: fixed income. We like to talk to Lared Landaman, general's 138 00:08:37,960 --> 00:08:41,280 Speaker 1: portfolio manager at TCW. Laird, thanks so much for joining 139 00:08:41,360 --> 00:08:44,360 Speaker 1: us here. We love getting your view here. It looks 140 00:08:44,480 --> 00:08:47,200 Speaker 1: like our good friends in Washington, DC are going to 141 00:08:48,320 --> 00:08:51,559 Speaker 1: avoid a debt default, a debt crisis. How do you 142 00:08:51,640 --> 00:08:53,440 Speaker 1: kind of put that all into context? 143 00:08:53,520 --> 00:08:53,720 Speaker 5: Here? 144 00:08:54,040 --> 00:08:56,120 Speaker 1: Were you ever? What was your level of concern? And 145 00:08:56,160 --> 00:08:57,319 Speaker 1: how do you think we go from here? 146 00:08:58,800 --> 00:08:58,959 Speaker 3: Well? 147 00:08:59,040 --> 00:09:02,000 Speaker 7: I think we have to say they avoided again. This 148 00:09:02,040 --> 00:09:05,680 Speaker 7: is sort of a uniquely American thing. It's kind of 149 00:09:05,720 --> 00:09:08,120 Speaker 7: like country line dancing or something that we go through 150 00:09:08,160 --> 00:09:11,240 Speaker 7: this dance every once in a while. Yeah, you know, 151 00:09:11,320 --> 00:09:15,120 Speaker 7: the bigger mistakes are the more likely cooler heads are 152 00:09:15,160 --> 00:09:18,120 Speaker 7: to prevail, so we never had that much concern about it. 153 00:09:19,240 --> 00:09:21,319 Speaker 7: We obviously went to a lot of operational hoops to 154 00:09:21,360 --> 00:09:24,160 Speaker 7: make sure in case there was a brief period of 155 00:09:24,200 --> 00:09:27,559 Speaker 7: default that you know, we could you know, as a manager, 156 00:09:27,600 --> 00:09:29,800 Speaker 7: we could manage that. But I don't think we had 157 00:09:29,840 --> 00:09:32,400 Speaker 7: any real belief that we were going to have a 158 00:09:32,480 --> 00:09:33,480 Speaker 7: default at this point. 159 00:09:34,440 --> 00:09:37,920 Speaker 4: Are you thinking more than about the next FED meeting? 160 00:09:38,000 --> 00:09:39,800 Speaker 4: Does that feel like the bigger question. 161 00:09:39,559 --> 00:09:39,960 Speaker 1: Mark for you? 162 00:09:41,520 --> 00:09:43,320 Speaker 7: Well, I think it is. I mean, I think, you know, 163 00:09:43,360 --> 00:09:45,800 Speaker 7: the market consensus is certainly one hundred percent over the 164 00:09:45,840 --> 00:09:50,240 Speaker 7: next two meetings for another hike, and certainly if we 165 00:09:50,280 --> 00:09:53,480 Speaker 7: got a strong jobs number, and again like the Jolts number, 166 00:09:53,520 --> 00:09:56,160 Speaker 7: these numbers can bounce around quite a bit, and the 167 00:09:56,200 --> 00:09:59,400 Speaker 7: market generally overreacts to this short term news. So we 168 00:09:59,400 --> 00:10:02,400 Speaker 7: could see short rates get pushed back up near their 169 00:10:02,480 --> 00:10:05,280 Speaker 7: highs again if we get a strong jobs number, but 170 00:10:05,360 --> 00:10:07,200 Speaker 7: certainly over the long term, you know, you look at 171 00:10:07,200 --> 00:10:10,200 Speaker 7: some of the effects that the higher rates are having, 172 00:10:10,280 --> 00:10:13,440 Speaker 7: whether it's what happened with banks in March or what's 173 00:10:13,480 --> 00:10:17,160 Speaker 7: happening to the interest expense on US debt right now. 174 00:10:18,120 --> 00:10:22,480 Speaker 7: Really moving up from nineteen percent of tax resort tax 175 00:10:22,520 --> 00:10:25,880 Speaker 7: dollars to thirty three percent is now being used for 176 00:10:26,240 --> 00:10:29,600 Speaker 7: interest expense. This is going to have a pretty big 177 00:10:30,080 --> 00:10:33,000 Speaker 7: hit to the economy, and I think the FED is 178 00:10:33,080 --> 00:10:36,120 Speaker 7: kind of dancing right on the edge here, not realizing 179 00:10:36,160 --> 00:10:40,160 Speaker 7: that these you know, the monetary policy hits with longer delays. 180 00:10:41,040 --> 00:10:43,000 Speaker 1: So lard giving that backdrop. Given where we are with 181 00:10:43,040 --> 00:10:46,640 Speaker 1: a FED and I guess the debt ceiling, where are 182 00:10:46,640 --> 00:10:49,960 Speaker 1: you seeing opportunities here at TCW? 183 00:10:51,559 --> 00:10:53,640 Speaker 7: Well, I think I think that we think fixed income, 184 00:10:53,880 --> 00:10:56,960 Speaker 7: you know, is setting up for probably close to double 185 00:10:57,000 --> 00:10:59,880 Speaker 7: digit types of returns. I think that you you want 186 00:10:59,920 --> 00:11:01,760 Speaker 7: to be in the intermediate part of the yield curve. 187 00:11:01,800 --> 00:11:03,439 Speaker 7: The FED is going to have to ease at some 188 00:11:03,559 --> 00:11:06,600 Speaker 7: point here. The banking system will continue to be under 189 00:11:06,600 --> 00:11:10,640 Speaker 7: stressed as long as they keep increasing rates or holding 190 00:11:10,679 --> 00:11:14,800 Speaker 7: them higher, and so eventually they're going to have to 191 00:11:14,800 --> 00:11:18,440 Speaker 7: turn this around. The market thinks the fourth quarter of 192 00:11:18,480 --> 00:11:22,240 Speaker 7: this year is when we start seeing easing, and that 193 00:11:22,360 --> 00:11:26,000 Speaker 7: will also bring about lower interest rate volatility. I think 194 00:11:26,040 --> 00:11:28,880 Speaker 7: you're very aware that interest rate volatility has been very high. 195 00:11:29,280 --> 00:11:33,240 Speaker 7: Sectors like agency mortgages are pretty much as cheap as 196 00:11:33,280 --> 00:11:35,160 Speaker 7: we've ever seen them because they've been hit by the 197 00:11:35,240 --> 00:11:39,520 Speaker 7: high volatility. We would go all in right now pretty 198 00:11:39,600 --> 00:11:44,000 Speaker 7: much on the agency mortgage basis. We think that that's probably, 199 00:11:44,360 --> 00:11:46,760 Speaker 7: you know, one of the most liquid and cheapest sectors 200 00:11:46,800 --> 00:11:51,559 Speaker 7: out there. Avoid sort of large scale exposure to corporates 201 00:11:52,040 --> 00:11:55,040 Speaker 7: at this point because they could see some spread widening 202 00:11:55,120 --> 00:11:57,400 Speaker 7: as the economy begins to deteriorate. 203 00:11:58,400 --> 00:12:00,920 Speaker 4: What are you thinking about in terms of the biggest 204 00:12:01,120 --> 00:12:05,080 Speaker 4: losers potentially heading into the second half of twenty twenty four, 205 00:12:05,120 --> 00:12:07,440 Speaker 4: where are you saying we need to kind of get 206 00:12:07,480 --> 00:12:07,920 Speaker 4: out of. 207 00:12:09,360 --> 00:12:13,240 Speaker 7: Well, if we're looking out over the next year, certainly 208 00:12:13,280 --> 00:12:18,560 Speaker 7: anything commercial real estate related, particularly around the office office 209 00:12:18,559 --> 00:12:21,559 Speaker 7: sector is going to be under pressure. But it'll expand 210 00:12:21,600 --> 00:12:24,880 Speaker 7: beyond that because, as we're very aware, small and mid 211 00:12:24,880 --> 00:12:27,880 Speaker 7: sized banks are going to be cutting back lending over 212 00:12:27,960 --> 00:12:29,880 Speaker 7: the next year, and they support a lot of not 213 00:12:29,920 --> 00:12:33,160 Speaker 7: necessarily office properties, but they support a lot of smaller 214 00:12:33,200 --> 00:12:35,520 Speaker 7: projects that can get rolled up into some of the 215 00:12:35,520 --> 00:12:40,640 Speaker 7: conduit deals that might be residential, multifamily, they might be 216 00:12:41,360 --> 00:12:44,400 Speaker 7: strip malls, things like that. I think there's going to 217 00:12:44,400 --> 00:12:49,760 Speaker 7: be general carnage there. We're seeing appraisals coming down in 218 00:12:50,000 --> 00:12:55,480 Speaker 7: LA on office properties, you know, fifty sixty percent from 219 00:12:55,600 --> 00:12:58,920 Speaker 7: twenty nineteen levels, and we certainly think that, you know, 220 00:12:58,960 --> 00:13:03,920 Speaker 7: you got to avoid office properties La San Francisco, Chicago, 221 00:13:04,559 --> 00:13:07,040 Speaker 7: New York, and Houston. Those are sort of the big 222 00:13:07,080 --> 00:13:10,320 Speaker 7: sectors that we're trying to avoid in our portfolio. And 223 00:13:10,360 --> 00:13:13,800 Speaker 7: we think there could be individual securities that are tied 224 00:13:13,840 --> 00:13:17,720 Speaker 7: to those office properties that could take very, very large losses. 225 00:13:17,760 --> 00:13:20,000 Speaker 7: So that to us is a priority to be avoiding 226 00:13:20,040 --> 00:13:22,360 Speaker 7: those pitfalls in the portfolio. 227 00:13:22,920 --> 00:13:26,000 Speaker 1: How about emerging markets, lair, Is that something that's attractive 228 00:13:26,040 --> 00:13:27,040 Speaker 1: to you guys at this point? 229 00:13:28,679 --> 00:13:32,000 Speaker 7: Well, I would always refer to Pennyfolio, our team leader 230 00:13:32,000 --> 00:13:35,280 Speaker 7: who's done it for forty plus years. They certainly think 231 00:13:35,280 --> 00:13:39,160 Speaker 7: that they're seeing some opportunities there. As we look at 232 00:13:39,600 --> 00:13:41,439 Speaker 7: the type of credit risk you have to take in 233 00:13:41,480 --> 00:13:46,000 Speaker 7: emerging markets for a largely US based portfolio that we manage, 234 00:13:46,760 --> 00:13:49,840 Speaker 7: we certainly see better value in things like agency mortgages. 235 00:13:49,880 --> 00:13:52,559 Speaker 7: As I mentioned, you're not taking a lot of credit risk, 236 00:13:52,600 --> 00:13:55,240 Speaker 7: at least as long as this debt deal passes. You're 237 00:13:55,320 --> 00:13:58,720 Speaker 7: not taking a lot of credit risk, and you're getting 238 00:13:58,720 --> 00:14:02,960 Speaker 7: spreads that are abu many of the investment grade emerging 239 00:14:03,000 --> 00:14:06,000 Speaker 7: market countries. So we're going to stick with sort of 240 00:14:06,040 --> 00:14:10,319 Speaker 7: what we think is cheapest and simplest in the portfolio here, 241 00:14:10,480 --> 00:14:12,920 Speaker 7: and we'll benefit most from a FED tightening. And that's 242 00:14:12,960 --> 00:14:14,440 Speaker 7: the agency mortgage basis. 243 00:14:14,640 --> 00:14:15,280 Speaker 6: All right, good. 244 00:14:15,120 --> 00:14:18,319 Speaker 1: Stuff, Laird Landman, thanks so much for joining us. Laird 245 00:14:18,400 --> 00:14:22,520 Speaker 1: Landman is the generalist portfolio manager at TCW and that 246 00:14:22,680 --> 00:14:25,240 Speaker 1: is a trust company of the West back in the days, 247 00:14:25,280 --> 00:14:28,680 Speaker 1: big big asset management firm, huge inequities, huge in fixed income, 248 00:14:29,320 --> 00:14:32,520 Speaker 1: based out in Los Angeles, a big account out there. 249 00:14:33,400 --> 00:14:36,520 Speaker 6: You're listening to the tape kens our live program Bloomberg 250 00:14:36,600 --> 00:14:40,200 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 251 00:14:40,240 --> 00:14:43,480 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 252 00:14:43,520 --> 00:14:46,320 Speaker 6: You can also listen live on Amazon Alexa from our 253 00:14:46,360 --> 00:14:50,720 Speaker 6: flagship New York station, Just say Alexa, play Bloomberg eleven thirty. 254 00:14:52,120 --> 00:14:54,760 Speaker 1: Let's check in with a professional here, Quincy Crosby. She 255 00:14:54,840 --> 00:14:58,600 Speaker 1: is the chief global strategist for LPL Financial, that is 256 00:14:58,640 --> 00:15:02,040 Speaker 1: the Nasdaq traded company. Lp LA is a ticker to 257 00:15:02,160 --> 00:15:05,640 Speaker 1: load into your Bloomberg terminal there, Quincy, it looks like 258 00:15:05,760 --> 00:15:10,480 Speaker 1: the uncertainty surrounding the debt deal to the extent there 259 00:15:10,520 --> 00:15:12,560 Speaker 1: was some uncertainty for some people, some people more so 260 00:15:12,600 --> 00:15:14,920 Speaker 1: than others. Looks like that's been kind of lifted here. 261 00:15:16,360 --> 00:15:18,280 Speaker 1: Is that important to you or if it is kind 262 00:15:18,280 --> 00:15:20,320 Speaker 1: of maybe, what else are you looking at now for 263 00:15:20,360 --> 00:15:22,840 Speaker 1: the next kind of big, big catalyst for this market 264 00:15:22,880 --> 00:15:23,720 Speaker 1: one way or the other? 265 00:15:25,120 --> 00:15:28,040 Speaker 5: Well, yeah, absolutely, I mean the market does think that 266 00:15:28,040 --> 00:15:30,440 Speaker 5: they're going to get the vote that it's been going 267 00:15:30,480 --> 00:15:32,680 Speaker 5: to obviously go through the House and then to the Senate, 268 00:15:33,160 --> 00:15:36,600 Speaker 5: and obviously they want to do it expeditiously. But the 269 00:15:36,640 --> 00:15:39,800 Speaker 5: market is also focused on the set and you may 270 00:15:39,840 --> 00:15:44,800 Speaker 5: have seen, you know, this morning, the probability, it's the futures. 271 00:15:44,880 --> 00:15:48,360 Speaker 5: It's about sixty percent for rat high June fourteenth. That's 272 00:15:48,440 --> 00:15:53,800 Speaker 5: client higher of following Loretta Mester's comments. Now she doesn't vote, 273 00:15:54,000 --> 00:15:57,880 Speaker 5: you know, many many of the because don't vote, but 274 00:15:57,920 --> 00:16:02,280 Speaker 5: nonetheless they are part of the discussion and she's highly regarded. 275 00:16:02,960 --> 00:16:06,320 Speaker 5: The question is whether or not the said actually does 276 00:16:06,640 --> 00:16:09,200 Speaker 5: come in with a raid hike, and the other question 277 00:16:09,360 --> 00:16:12,760 Speaker 5: is if they do, well it be one or two 278 00:16:12,920 --> 00:16:16,280 Speaker 5: that the market can expect. So this is something that 279 00:16:16,520 --> 00:16:20,280 Speaker 5: the market is trying to piece together how the SAID 280 00:16:20,360 --> 00:16:23,840 Speaker 5: will see the data coming in, particularly the payroll data 281 00:16:24,320 --> 00:16:28,520 Speaker 5: and probably the ISM report next week on the price 282 00:16:28,600 --> 00:16:31,400 Speaker 5: is paid in the service sector. So there's so much 283 00:16:31,440 --> 00:16:34,000 Speaker 5: for the market to have to digest. But that really 284 00:16:34,440 --> 00:16:37,480 Speaker 5: does matter for the market, and so does the debt ceiling, 285 00:16:37,560 --> 00:16:41,040 Speaker 5: needless to say, and you know, the market has quite 286 00:16:41,080 --> 00:16:43,680 Speaker 5: a bit of a wall of worry yet yet the 287 00:16:43,720 --> 00:16:47,080 Speaker 5: market is up for the year, and that is the 288 00:16:47,120 --> 00:16:51,320 Speaker 5: price action that says, hey, wall of worry, don't stop worrying. 289 00:16:51,720 --> 00:16:53,280 Speaker 5: We're still going to prevail. 290 00:16:54,400 --> 00:16:56,880 Speaker 4: Hey, Quincy, I wanted to reach out to you about this, 291 00:16:56,920 --> 00:16:59,080 Speaker 4: so it's perfectly you're on our show today to ask 292 00:16:59,120 --> 00:17:02,240 Speaker 4: you about how US potentially approaching the end of the 293 00:17:02,280 --> 00:17:06,480 Speaker 4: FED rate hiking cycle, uh might lead to more weakness 294 00:17:06,520 --> 00:17:09,240 Speaker 4: in the US dollar. And if that is something that 295 00:17:09,320 --> 00:17:13,840 Speaker 4: you're anticipating and maybe changing some of your thinking and 296 00:17:13,880 --> 00:17:15,320 Speaker 4: positioning around. 297 00:17:16,160 --> 00:17:19,560 Speaker 5: You know, that's that's logical. You know, there's there's there's 298 00:17:19,600 --> 00:17:23,720 Speaker 5: an entire story about the dollar, whether or not you know, 299 00:17:23,800 --> 00:17:27,080 Speaker 5: king dollar is finished. And that's one thing, whether or 300 00:17:27,160 --> 00:17:29,640 Speaker 5: not you know it is China trying to push us 301 00:17:30,040 --> 00:17:33,359 Speaker 5: the dollar out of the reserve currency status or put 302 00:17:33,359 --> 00:17:35,280 Speaker 5: the U on right up there with the US dollar. 303 00:17:35,320 --> 00:17:38,960 Speaker 5: But the other one is predicated on on the economy. 304 00:17:39,000 --> 00:17:43,600 Speaker 5: It's predicated on on whether or not we do stop 305 00:17:43,720 --> 00:17:48,440 Speaker 5: raising rates and we lose the interest rate differential. That's normal, 306 00:17:48,800 --> 00:17:52,600 Speaker 5: and you know, if the FED does finish when we 307 00:17:52,640 --> 00:17:55,480 Speaker 5: do expect the FED to be finished, you know, if 308 00:17:55,480 --> 00:17:57,840 Speaker 5: it's not in June, it'll be sometime in the summer 309 00:17:58,080 --> 00:18:01,920 Speaker 5: that the dollar will ease further. And that does help 310 00:18:02,280 --> 00:18:06,000 Speaker 5: global financial conditions. A weaker dollar does help. It helps 311 00:18:06,680 --> 00:18:09,520 Speaker 5: many of the big tech names. There are global leaders 312 00:18:09,560 --> 00:18:13,520 Speaker 5: that got a global footprint, and a software dollar does help. 313 00:18:13,840 --> 00:18:17,800 Speaker 5: It also helps other companies, you know, the companies in 314 00:18:17,880 --> 00:18:19,959 Speaker 5: the S and P five hundred that have nothing to 315 00:18:20,000 --> 00:18:23,280 Speaker 5: do with technology, but that you know, sell overseas. But 316 00:18:23,359 --> 00:18:27,400 Speaker 5: it also helps emerging markets in that we know from 317 00:18:27,440 --> 00:18:30,520 Speaker 5: many of the reports coming out that are having trouble 318 00:18:30,600 --> 00:18:34,560 Speaker 5: servicing their debt dollar denominated debt. The weaker dollar does help. 319 00:18:34,880 --> 00:18:38,919 Speaker 5: It also helps commodities. So all of the all of 320 00:18:38,960 --> 00:18:43,399 Speaker 5: that together should help, should help the overall economy and 321 00:18:43,520 --> 00:18:47,760 Speaker 5: also help you know, the big companies and help help 322 00:18:47,800 --> 00:18:49,520 Speaker 5: emerging markets to some degree. 323 00:18:49,840 --> 00:18:52,440 Speaker 4: You mentioned some of the companies that have a big 324 00:18:52,480 --> 00:18:57,240 Speaker 4: presence overseas being some of the bigger beneficiaries within specifically 325 00:18:57,280 --> 00:19:01,320 Speaker 4: the consumer discretionary and staples sectors. Who do you think 326 00:19:01,359 --> 00:19:05,600 Speaker 4: the biggest potential winners are because of that overseas presence? 327 00:19:06,800 --> 00:19:10,000 Speaker 5: Well, you know, now, all all of the all the companies, 328 00:19:10,040 --> 00:19:13,200 Speaker 5: I mean, you even have Walmart is active overseas. You 329 00:19:13,760 --> 00:19:18,840 Speaker 5: have Procter and Gamble, the host raft of names that 330 00:19:19,280 --> 00:19:24,560 Speaker 5: came out, the pharmaceuticals that sell overseas. All of those companies, 331 00:19:24,600 --> 00:19:29,240 Speaker 5: coupled with the Microsoft, coupled with Apple, all of those 332 00:19:29,359 --> 00:19:33,560 Speaker 5: are major beneficiaries of the weaker dollar. In fact, Nike 333 00:19:34,080 --> 00:19:36,879 Speaker 5: I could go on and on because remember when the 334 00:19:37,000 --> 00:19:41,560 Speaker 5: dollar was at its you know, full strength, all we 335 00:19:41,600 --> 00:19:43,760 Speaker 5: would hear during the early season was how it was 336 00:19:43,880 --> 00:19:48,760 Speaker 5: hindering their ability to do well. Now we're on the 337 00:19:48,880 --> 00:19:53,040 Speaker 5: road towards the other extreme with the dollar easing, and 338 00:19:53,320 --> 00:19:56,000 Speaker 5: it will ease. It's part of the it's part of 339 00:19:56,040 --> 00:20:01,440 Speaker 5: the natural equilibrium in currency market that when your central bank, 340 00:20:01,560 --> 00:20:05,200 Speaker 5: particularly when it's the FED, begins to tail off, your 341 00:20:05,240 --> 00:20:07,040 Speaker 5: currency is going a week and you still have the 342 00:20:07,600 --> 00:20:11,960 Speaker 5: euro climbing higher because the European central bank is most 343 00:20:12,119 --> 00:20:15,800 Speaker 5: likely has a number of more rate hikes in the pipeline. 344 00:20:16,280 --> 00:20:19,240 Speaker 4: So you think even a retailer like a Nike has 345 00:20:19,280 --> 00:20:21,760 Speaker 4: a chance despite some of the bad earnings that we 346 00:20:21,880 --> 00:20:24,280 Speaker 4: just got from them because of weakening dollar. 347 00:20:25,280 --> 00:20:28,560 Speaker 5: Well, no, it won't change a dynamic that is, you know, 348 00:20:28,560 --> 00:20:32,239 Speaker 5: if you don't have customers or the global economy is 349 00:20:32,280 --> 00:20:35,719 Speaker 5: slowing dramatically. But what it does do it gives you 350 00:20:35,760 --> 00:20:40,919 Speaker 5: an edge. It helps your competitiveness overseas. But you know, 351 00:20:41,000 --> 00:20:43,639 Speaker 5: you still need to have demand, you still need to 352 00:20:43,680 --> 00:20:47,320 Speaker 5: have top line revenue growth. But what a weaker dollar 353 00:20:47,680 --> 00:20:51,080 Speaker 5: does do it helps? It gives you an edge. 354 00:20:51,640 --> 00:20:54,440 Speaker 1: Hey, Quin, I'm not sure if I'm representative, but boy, 355 00:20:54,560 --> 00:20:56,480 Speaker 1: up until a few months ago, I didn't even really 356 00:20:56,480 --> 00:20:59,200 Speaker 1: think about this whole thing called AI, what the kids 357 00:20:59,240 --> 00:21:04,040 Speaker 1: call AI artificial intelligence. But boy, every CEO on every 358 00:21:04,040 --> 00:21:06,320 Speaker 1: earnest call talks about how AI is going to be 359 00:21:06,320 --> 00:21:08,880 Speaker 1: the greatest thing for their business, and it doesn't matter 360 00:21:08,920 --> 00:21:12,119 Speaker 1: what business they're in. But then you see Nvidia raised 361 00:21:12,160 --> 00:21:15,560 Speaker 1: their guidance last week and just an explosion in market 362 00:21:15,600 --> 00:21:19,560 Speaker 1: capitalization for that company. I don't think I've ever seen 363 00:21:19,600 --> 00:21:21,679 Speaker 1: that before. I mean, what do you make of this 364 00:21:21,760 --> 00:21:25,560 Speaker 1: whole AI thing? Is it something that you think about 365 00:21:25,840 --> 00:21:31,399 Speaker 1: as you think about companies and investments. 366 00:21:29,720 --> 00:21:33,800 Speaker 5: Well, yeah, absolutely. I mean, you know, I have returned 367 00:21:33,800 --> 00:21:36,280 Speaker 5: things to Amazon, and the first time I did it, 368 00:21:36,280 --> 00:21:38,000 Speaker 5: I didn't know how to do it, and the kids 369 00:21:38,000 --> 00:21:40,320 Speaker 5: weren't around to tell me or to actually do it 370 00:21:40,359 --> 00:21:43,200 Speaker 5: for me. So I called the number and the guy 371 00:21:43,280 --> 00:21:46,399 Speaker 5: who answered wasn't real, but boy was he nice. I 372 00:21:46,440 --> 00:21:49,840 Speaker 5: felt like calling up again, just so easy to talk 373 00:21:49,920 --> 00:21:54,479 Speaker 5: to answering my questions. What the AI we have to 374 00:21:54,680 --> 00:21:58,280 Speaker 5: you know, put it in the context of why are 375 00:21:58,359 --> 00:22:02,600 Speaker 5: the companies, the large companies going into this area, why 376 00:22:02,600 --> 00:22:05,560 Speaker 5: are they working with in the video, for example, Microsoft 377 00:22:06,040 --> 00:22:09,879 Speaker 5: continuing to present it because they will be able to 378 00:22:09,960 --> 00:22:13,600 Speaker 5: sell it to other companies so that they could cut costs. 379 00:22:13,840 --> 00:22:17,919 Speaker 5: This is about cutting costs, and that is that is 380 00:22:18,040 --> 00:22:21,520 Speaker 5: why it is important because it's the development which has 381 00:22:21,560 --> 00:22:27,160 Speaker 5: already begun. But if it intensifies with the attention that 382 00:22:27,200 --> 00:22:31,520 Speaker 5: we see that in the video has sort of unwound, 383 00:22:32,680 --> 00:22:35,359 Speaker 5: it's going to be important and companies are going to 384 00:22:35,359 --> 00:22:38,960 Speaker 5: be able to save money. Customer service is a you know, 385 00:22:39,119 --> 00:22:44,040 Speaker 5: primary example of how much AI can help. Now, the 386 00:22:44,080 --> 00:22:48,399 Speaker 5: thing is you need to have strong balance sheets, and 387 00:22:48,520 --> 00:22:52,159 Speaker 5: companies that are such such as I'm not suggesting it, 388 00:22:52,640 --> 00:22:56,359 Speaker 5: recommending it that such as a Microsoft to develop it 389 00:22:56,520 --> 00:23:00,199 Speaker 5: and and fine tune it towards how they can all 390 00:23:00,240 --> 00:23:04,080 Speaker 5: evan to other companies. And that's going to be extremely important. 391 00:23:04,400 --> 00:23:06,720 Speaker 5: You know, you see it and Sada I say this 392 00:23:06,840 --> 00:23:10,720 Speaker 5: on the internet. Even with Bloomberg write help with automation, 393 00:23:11,520 --> 00:23:15,320 Speaker 5: that's going to intensify and it's going to become a 394 00:23:15,880 --> 00:23:20,000 Speaker 5: much more tvalent part of the of the landscape, of 395 00:23:20,000 --> 00:23:23,240 Speaker 5: the economic landscape. So, by the way, just having the 396 00:23:23,400 --> 00:23:26,560 Speaker 5: video in that cohort to begin with this is before 397 00:23:26,600 --> 00:23:29,680 Speaker 5: their earnings, was pretty amazing. Just you know, I've asked 398 00:23:29,720 --> 00:23:31,720 Speaker 5: you said, what is it? How do you pronounce it? 399 00:23:32,160 --> 00:23:35,320 Speaker 5: How does this fit in with you know, the megacat 400 00:23:35,440 --> 00:23:38,160 Speaker 5: techniques they are part of now the cohort it. 401 00:23:38,080 --> 00:23:40,600 Speaker 1: Is actually well the others there will be other Quincy, 402 00:23:40,840 --> 00:23:43,040 Speaker 1: thank you so much for joining us. Quincy Crosby, chief 403 00:23:43,119 --> 00:23:47,760 Speaker 1: Global Strategists at LPL Financial talking about these markets, talking 404 00:23:47,760 --> 00:23:51,040 Speaker 1: about AI. It's a thing. Folks in Vidio knows it. 405 00:23:51,480 --> 00:23:52,680 Speaker 1: This is Bloomberg. 406 00:23:54,119 --> 00:23:57,960 Speaker 6: You're listening to the Team Cancer Line program Bloomberg Markets 407 00:23:58,000 --> 00:24:01,920 Speaker 6: weekdays at ten am Eastern Burk dot Com. The iHeartRadio 408 00:24:01,960 --> 00:24:04,320 Speaker 6: app and the blow Burg Business app, or listen on 409 00:24:04,359 --> 00:24:06,360 Speaker 6: demand wherever you get your podcasts. 410 00:24:09,200 --> 00:24:11,800 Speaker 1: You know, I always say, or I have been saying recently, that, well, 411 00:24:11,840 --> 00:24:13,199 Speaker 1: if I were to come back again and do this 412 00:24:13,240 --> 00:24:15,439 Speaker 1: Wall Street thing again, I might look at private credit. 413 00:24:15,520 --> 00:24:17,560 Speaker 1: That is a business that I think is just booming. 414 00:24:17,640 --> 00:24:21,240 Speaker 1: It's got a great presence in the marketplace. It's desperately needed, 415 00:24:21,600 --> 00:24:25,560 Speaker 1: particularly after the Great Financial Crisis, when the banks have 416 00:24:25,600 --> 00:24:28,159 Speaker 1: been kind of pulling back a little bit. So I 417 00:24:28,160 --> 00:24:31,000 Speaker 1: want to get the latest on what's happening private credit market. 418 00:24:31,000 --> 00:24:33,040 Speaker 1: How's it performing in a rate where in a world 419 00:24:33,040 --> 00:24:35,240 Speaker 1: where rates are arising. Jess Larson can help us out 420 00:24:35,240 --> 00:24:37,240 Speaker 1: on that. He is the CEO and founder of Briarcliffe 421 00:24:37,640 --> 00:24:40,400 Speaker 1: Credit Partners. Jess again, I love your business. I love 422 00:24:40,400 --> 00:24:42,919 Speaker 1: the private credit business. I got my credit training at 423 00:24:42,920 --> 00:24:45,199 Speaker 1: the Chase Manhattan Bank, so I will stack my skills 424 00:24:45,200 --> 00:24:49,440 Speaker 1: against anybody out there. Talk to just about the private 425 00:24:49,480 --> 00:24:52,560 Speaker 1: credit market. How it's behaving, you know, over the last 426 00:24:52,600 --> 00:24:54,760 Speaker 1: twelve eighteen months in this rising interest rate environment. 427 00:24:55,480 --> 00:24:58,560 Speaker 8: Mm hmm. Sould first, Well, good to be back on 428 00:24:58,600 --> 00:25:01,280 Speaker 8: the show. It's always a pleasure and I'm so glad 429 00:25:01,320 --> 00:25:02,879 Speaker 8: to hear that in your next life you're going to 430 00:25:02,880 --> 00:25:06,280 Speaker 8: be a private credit Yes, personal, right, we can do 431 00:25:06,320 --> 00:25:06,800 Speaker 8: this together. 432 00:25:07,000 --> 00:25:07,920 Speaker 1: Very good. 433 00:25:08,560 --> 00:25:10,119 Speaker 8: Well, you know it's so interesting when you hear the 434 00:25:10,119 --> 00:25:12,800 Speaker 8: Bloomberg class, it sounds it's almost a little depressing, right, 435 00:25:12,800 --> 00:25:16,440 Speaker 8: with all the various equity indices down. So I'm glad 436 00:25:16,480 --> 00:25:19,879 Speaker 8: that we turn into much more positive news and positive 437 00:25:19,880 --> 00:25:23,080 Speaker 8: subjects such as the private credit because private credit is 438 00:25:23,080 --> 00:25:25,600 Speaker 8: not just doing well. We're in a bull market poll, 439 00:25:25,880 --> 00:25:28,480 Speaker 8: we're in an absolute bull market. And when we're sitting 440 00:25:28,520 --> 00:25:32,119 Speaker 8: here in with rates going up, the beautiful thing about 441 00:25:32,160 --> 00:25:36,080 Speaker 8: private credit is is predominantly floating break So the investors 442 00:25:36,160 --> 00:25:38,520 Speaker 8: are benefiting from rates going up. 443 00:25:40,760 --> 00:25:45,119 Speaker 4: Is that true across the board, I guess globally? Or 444 00:25:45,240 --> 00:25:48,480 Speaker 4: is that is that something that you're seeing in some 445 00:25:48,840 --> 00:25:51,080 Speaker 4: regions more than others. 446 00:25:52,080 --> 00:25:54,639 Speaker 8: Well, first of all, I think what we need to 447 00:25:54,680 --> 00:25:58,600 Speaker 8: think about private credit really consists of twenty six substrategies. 448 00:25:58,600 --> 00:26:02,280 Speaker 8: But the vasa joys of those strategies are floating rate. 449 00:26:02,800 --> 00:26:05,919 Speaker 8: So whether you are in the Euro market or you're 450 00:26:05,960 --> 00:26:08,800 Speaker 8: sitting here in the US, if rates going up, your 451 00:26:08,840 --> 00:26:12,040 Speaker 8: private credit returns will go up, irrespectable of where you 452 00:26:12,080 --> 00:26:13,920 Speaker 8: find yourself so. 453 00:26:14,320 --> 00:26:17,639 Speaker 1: Jess, A big part of your businesses helping these private 454 00:26:17,720 --> 00:26:22,159 Speaker 1: equity guys finance their deals, and they can go to 455 00:26:22,200 --> 00:26:24,880 Speaker 1: a you know, a Bank of America JP Morgan, or 456 00:26:24,920 --> 00:26:28,119 Speaker 1: they can also come to private credit providers. Talk to 457 00:26:28,200 --> 00:26:30,200 Speaker 1: us about the deal flow you're seeing, because we ain't 458 00:26:30,240 --> 00:26:31,480 Speaker 1: seeing much on Wall Street. 459 00:26:33,600 --> 00:26:37,240 Speaker 8: No, that's exactly what we're all seeing. Is it is 460 00:26:37,320 --> 00:26:40,439 Speaker 8: kind of quiet right on the private equity side of things. 461 00:26:40,880 --> 00:26:44,880 Speaker 8: But that doesn't that doesn't stop mid market US companies 462 00:26:44,880 --> 00:26:47,720 Speaker 8: for needing capital. It's just a question or not where 463 00:26:47,720 --> 00:26:50,240 Speaker 8: do you go. You can't really go to the private 464 00:26:50,280 --> 00:26:53,720 Speaker 8: equity market anymore because valuations are low and the last 465 00:26:53,720 --> 00:26:55,880 Speaker 8: thing you want to do if you want to access 466 00:26:55,880 --> 00:26:58,800 Speaker 8: capital as a mid market borer is going into a 467 00:26:58,960 --> 00:26:59,560 Speaker 8: down round. 468 00:26:59,680 --> 00:26:59,840 Speaker 7: Right. 469 00:27:00,000 --> 00:27:02,800 Speaker 8: We don't want to have low evaluation two years ago, 470 00:27:03,080 --> 00:27:05,320 Speaker 8: So you want to look at the credit market now 471 00:27:05,359 --> 00:27:08,480 Speaker 8: three four months ago you could have been forgiven for 472 00:27:08,640 --> 00:27:12,000 Speaker 8: looking at the banks, but then we saw ISBB Signature Bank, 473 00:27:12,040 --> 00:27:15,359 Speaker 8: person Public all having trouble. So if you are a 474 00:27:15,359 --> 00:27:18,280 Speaker 8: mid market company and you need capital, you will be 475 00:27:18,760 --> 00:27:22,840 Speaker 8: going to the private credit market, are you? 476 00:27:23,480 --> 00:27:25,520 Speaker 4: I have to ask this because we can't stop talking 477 00:27:25,520 --> 00:27:31,240 Speaker 4: about AI are you seeing any increase in AI related 478 00:27:31,359 --> 00:27:34,879 Speaker 4: deals or are you thinking about it more frequently than 479 00:27:34,880 --> 00:27:35,760 Speaker 4: you previously did. 480 00:27:37,240 --> 00:27:39,680 Speaker 8: I think there's a lot of talk, a lot of headlines, 481 00:27:39,680 --> 00:27:41,879 Speaker 8: and it's exciting what's going to happen in the future 482 00:27:41,880 --> 00:27:44,920 Speaker 8: on AI. Right now, we are just more concerned about 483 00:27:45,080 --> 00:27:48,040 Speaker 8: any type of mid market US companies or borer that 484 00:27:48,119 --> 00:27:51,960 Speaker 8: needs access to capital. So that's from our daily work. 485 00:27:52,040 --> 00:27:54,640 Speaker 8: It's less about AI, but it's very interesting to read. 486 00:27:55,320 --> 00:27:55,640 Speaker 6: All right. 487 00:27:55,680 --> 00:27:58,840 Speaker 1: So just in the US, a mid market company, if 488 00:27:58,880 --> 00:28:02,159 Speaker 1: I come to I need, you know, a couple one 489 00:28:02,240 --> 00:28:06,560 Speaker 1: hundred million dollars of credit debt capital, and I go 490 00:28:06,640 --> 00:28:09,120 Speaker 1: to my choices, are I don't know, a good quality 491 00:28:09,320 --> 00:28:11,520 Speaker 1: mid sized bank and M and T bank out of Buffalo. 492 00:28:12,359 --> 00:28:16,680 Speaker 1: What's the difference in the cost to me them versus 493 00:28:16,720 --> 00:28:17,919 Speaker 1: maybe coming to you. 494 00:28:20,760 --> 00:28:24,200 Speaker 8: I think what we will see is with the failure 495 00:28:24,320 --> 00:28:27,320 Speaker 8: of it be signature ins versus public even though we're 496 00:28:27,320 --> 00:28:29,640 Speaker 8: not having another way, what we are seeing is there's 497 00:28:29,680 --> 00:28:32,960 Speaker 8: certainly some lack of regulatory environment that needs to be 498 00:28:33,119 --> 00:28:35,960 Speaker 8: tightened up a bit. When that tightens up, it will 499 00:28:36,000 --> 00:28:38,920 Speaker 8: be even more difficult for these banks to actually be 500 00:28:39,240 --> 00:28:43,920 Speaker 8: a capital provider to borrowers, so the cost of it 501 00:28:44,080 --> 00:28:46,720 Speaker 8: will go up. But what's really interesting here is what 502 00:28:46,880 --> 00:28:49,680 Speaker 8: we learned from ASBB signature and versus public is there's 503 00:28:49,720 --> 00:28:53,840 Speaker 8: a mismatch between accid and liability. There's also regulatory risk, 504 00:28:53,960 --> 00:28:57,200 Speaker 8: and there's the whole new risk we never thought about before, 505 00:28:57,240 --> 00:29:00,400 Speaker 8: the depositor risk. When people start leaving your bank and 506 00:29:00,520 --> 00:29:03,200 Speaker 8: take that it positive with them, it hampers the bank's 507 00:29:03,200 --> 00:29:06,240 Speaker 8: ability to lend money and that we do not have 508 00:29:06,360 --> 00:29:09,160 Speaker 8: in the private credit space, and so we will still 509 00:29:09,240 --> 00:29:10,960 Speaker 8: be seeing people flock into private credit. 510 00:29:13,000 --> 00:29:16,840 Speaker 4: Do you anticipate us seeing more of that moving forward, 511 00:29:16,960 --> 00:29:18,200 Speaker 4: that deposit flight? 512 00:29:21,160 --> 00:29:24,720 Speaker 8: I really hope not right because I think they I 513 00:29:24,800 --> 00:29:27,680 Speaker 8: think we stabilize the situation pretty well. There are still 514 00:29:27,720 --> 00:29:30,080 Speaker 8: some issues out there, but I don't think it is 515 00:29:30,200 --> 00:29:33,960 Speaker 8: necessarily terribly grim. But we have seen you know, depositive 516 00:29:34,000 --> 00:29:36,680 Speaker 8: makeup from some of the smaller risky banks into some 517 00:29:36,840 --> 00:29:41,320 Speaker 8: of the largest so you know, less risky banks so 518 00:29:41,400 --> 00:29:43,360 Speaker 8: to speak, and so there may be a little bit 519 00:29:43,400 --> 00:29:45,320 Speaker 8: of movement, but I don't think we'll see much movement 520 00:29:45,400 --> 00:29:46,280 Speaker 8: in the depositors. 521 00:29:47,120 --> 00:29:49,480 Speaker 1: So just you know, when when rates were really low, 522 00:29:49,680 --> 00:29:53,720 Speaker 1: near near zero, the returns that you know, private credit 523 00:29:53,840 --> 00:29:58,680 Speaker 1: offered a lot of investors were just compelling. Now I 524 00:29:58,720 --> 00:30:00,760 Speaker 1: can stick money into two year treasure can get four 525 00:30:00,800 --> 00:30:04,440 Speaker 1: and a half percent. Here, what's the am I? 526 00:30:04,680 --> 00:30:04,800 Speaker 6: Am? 527 00:30:04,800 --> 00:30:08,840 Speaker 1: I still getting a relative outperformance from investing in private credit. 528 00:30:09,400 --> 00:30:10,800 Speaker 1: What are you seeing in terms of the fund flow 529 00:30:10,840 --> 00:30:11,920 Speaker 1: to private credit these days? 530 00:30:12,200 --> 00:30:16,000 Speaker 8: Listen, Paul, you're asking exactly the right question, right because 531 00:30:16,040 --> 00:30:19,080 Speaker 8: you may think that sounds like a good return compared 532 00:30:19,080 --> 00:30:21,320 Speaker 8: to where we were when we had zero percent rates. 533 00:30:21,680 --> 00:30:24,760 Speaker 8: But look at this the ten year analyzed growth returns 534 00:30:24,840 --> 00:30:28,280 Speaker 8: in leverage loans three point eight percent, high yield three 535 00:30:28,360 --> 00:30:33,520 Speaker 8: point nine, direct lending nine point eight percent, right, so 536 00:30:33,680 --> 00:30:37,080 Speaker 8: we will still see that thread between your high yield 537 00:30:37,160 --> 00:30:40,480 Speaker 8: and your direct lending and your private credit. So definitely 538 00:30:40,680 --> 00:30:42,960 Speaker 8: you still want you always wanted to take a look 539 00:30:42,960 --> 00:30:44,880 Speaker 8: at the private credit if you can take the liquid 540 00:30:45,200 --> 00:30:47,320 Speaker 8: liquid essay class. 541 00:30:47,560 --> 00:30:50,240 Speaker 1: Exactly, So just like twenty seconds left, what's a typical 542 00:30:50,520 --> 00:30:52,600 Speaker 1: holding time frame for private credit? 543 00:30:53,880 --> 00:30:56,400 Speaker 8: Well, the private credit funds tend to be five to 544 00:30:56,520 --> 00:30:59,720 Speaker 8: seven years, where on the private equity it is probably 545 00:31:00,000 --> 00:31:03,160 Speaker 8: into twelve years. So you're getting a little bit fatter 546 00:31:03,240 --> 00:31:08,080 Speaker 8: liquidity from your private credit Interactually, and nowadays Paula here 547 00:31:08,200 --> 00:31:12,040 Speaker 8: this nowadays, you're probably getting very similar rate of returns 548 00:31:12,400 --> 00:31:17,200 Speaker 8: as we are in a slow growth or a recessionary environment, 549 00:31:17,560 --> 00:31:20,560 Speaker 8: you equity returns will continue to be volatized, but also 550 00:31:20,760 --> 00:31:22,680 Speaker 8: lower equity return Yep. 551 00:31:22,800 --> 00:31:25,680 Speaker 1: Well all right, Jess, that's gray. So I've have to 552 00:31:25,720 --> 00:31:27,320 Speaker 1: leave it there just because of the time. JUSTS Larson, 553 00:31:27,440 --> 00:31:32,240 Speaker 1: CEO and founder Briar Criff Briar Cliff Credit Partners, Private Credit. 554 00:31:32,320 --> 00:31:34,760 Speaker 1: I'm telling you, folks, it is a awesome business. It 555 00:31:34,760 --> 00:31:37,000 Speaker 1: looks like a very interesting asset class from a relative 556 00:31:37,400 --> 00:31:38,320 Speaker 1: return perspective. 557 00:31:38,600 --> 00:31:43,000 Speaker 2: This is bloomber Thanks for listening to the Bloomberg Markets podcast. 558 00:31:43,440 --> 00:31:46,560 Speaker 2: You can subscribe and listen to interviews at Apple Podcasts 559 00:31:46,760 --> 00:31:50,680 Speaker 2: or whatever podcast platform you prefer. I'm Matt Miller. I'm 560 00:31:50,720 --> 00:31:54,120 Speaker 2: on Twitter at Matt Miller nineteen seventy three and on. 561 00:31:54,200 --> 00:31:57,240 Speaker 1: Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, 562 00:31:57,320 --> 00:31:59,760 Speaker 1: you can always catch us worldwide at Bloomberg Radio.