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Speaker 2: Ale Steeler alongside Paul Sweeney. This is Bloomberg in Best
Speaker 2: twenty twenty five. We are down here at the New
Speaker 2: York Financial District. This is where all the big names
Speaker 2: in finance, banking, asset managers, private credit, private equity all
Speaker 2: come together and talk about the way forward. And part
Speaker 2: of that way forward is the policy that's going to
Speaker 2: come out of Washington, d C and any more insight.
Speaker 2: We'll get on that on tonight's State of the Union
Speaker 2: with President Trump. So we want to go to DC
Speaker 2: with Nathan Dean. He's Bloomberg Intelligence senior policy analyst. Nathan.
Speaker 2: There's so much to unpack here, but markets are down,
Speaker 2: trade wars on does President Trump we'll get a stock
Speaker 2: market today?
Speaker 3: No, I don't think so.
Speaker 4: I mean I think President Trump this is a long
Speaker 4: term message from the White House in terms of these tariffs.
Speaker 4: You know, look, you know President Trump has been saying
Speaker 4: for months the tariffs are his favorite word or maybe
Speaker 4: his fourth favorite word, depending on when he talks about it.
Speaker 4: But you know, and I think this was anticipated. I
Speaker 4: mean everybody was thinking, you know, is he going to
Speaker 4: do this? Is he not going to do this? But
Speaker 4: tariff's were going to come. It was just a matter
Speaker 4: of the size and the scope. Now, look, President Trump negotiates,
Speaker 4: That's what he does. There's always going to be a negotiation.
Speaker 4: But the response that we have seen from Ottawa and
Speaker 4: Mexico City today suggests that those negotiations are going to
Speaker 4: be taking place right away.
Speaker 3: This is going to need some time to cook.
Speaker 4: So I think what you're going to see tonight in
Speaker 4: this joint address to Congress is you're going to see
Speaker 4: President Trump double down on this idea of tariffs, an
Speaker 4: idea of bringing back manufacturing jobs to the United States.
Speaker 4: His true social posts about farmers growing stuff in the
Speaker 4: United States to sell in the United States. That's the
Speaker 4: message to which you're going to hear tonight. Wall Street
Speaker 4: probably isn't going to like that, but I don't think
Speaker 4: you're going to see any reaction from the White House
Speaker 4: in terms of Wall Street.
Speaker 3: A couple of weeks at the earliest.
Speaker 5: So, Nathan, what is the feeling in a d C
Speaker 5: amongst you know, Congress, just the system, theocracy about where
Speaker 5: this is all going here.
Speaker 4: Yeah, so there's gonna be a lot of uneasy, especially
Speaker 4: amongst the Republicans in terms of these tariffs.
Speaker 3: You know, Senator Rampaul even just tweeted two.
Speaker 4: Hours ago that look, tariffs are going to increase prices,
Speaker 4: and he cited automobiles that you know, auto prices are
Speaker 4: going to go up as a result of these tariffs.
Speaker 4: Senator Grassley from Iowa, he's gonna have any problem this
Speaker 4: this tonight as well, because, as President Trump says in
Speaker 4: the speech, look what I did in terms of the tariffs,
Speaker 4: will China put retialitary tariffs on soybeans? And there's a
Speaker 4: lot of soybeans that go to China from the United States.
Speaker 3: So I think what's going to happen is over the
Speaker 3: next few days. In terms of this.
Speaker 4: Republican response is they're going to wait and wait to
Speaker 4: see what happens.
Speaker 3: Now.
Speaker 4: Target is best and Best Buy have already said the
Speaker 4: price increases are probably going to be coming in the
Speaker 4: next few days. Is this enough to get President Trump
Speaker 4: to change his mind.
Speaker 3: Probably not.
Speaker 4: But as these farmers talk to folks like Senator Grassley,
Speaker 4: they're going to be saying, look, soybeans are down, we don't.
Speaker 3: Have a place to sell. So if you're not going
Speaker 3: to give us a tariff relief.
Speaker 4: Then you have to give us subsidies via a farm
Speaker 4: bill package. So there's a lot of unease negotiations here
Speaker 4: to be taking place between Congress and the White House
Speaker 4: over this tariff policy.
Speaker 2: Which is what we heard from Justin Trudeau of Canada
Speaker 2: saying we're going to support businesses that are going to
Speaker 2: be hit by these tariffs when he was speaking earlier today.
Speaker 2: So this all comes ahead of the State of the Union. Nathan,
Speaker 2: what's going to be say the top one or two
Speaker 2: things that you need to hear to help I don't know,
Speaker 2: make a policy decision, have conviction on where we're headed.
Speaker 4: Yeah, So when it comes to tariffs in particular, I'm
Speaker 4: not exactly sure what President like, Look, we're going to
Speaker 4: be seeing if there's any nuggets that President Trump says
Speaker 4: in this speech that Canada and Mexico can come back with.
Speaker 4: Now President Trump has always said this is about fentanyl.
Speaker 4: You know, I'm not exactly sure if I believe that
Speaker 4: the reason being is is that, you know, the Canada
Speaker 4: and Mexico agreement from one month ago, ten thousand troops
Speaker 4: on the border and so forth. Prime Minister Trudeau even
Speaker 4: just said this morning that.
Speaker 3: They've done that.
Speaker 4: What I need to see from President Trump is this
Speaker 4: idea of is there any way that we could scale
Speaker 4: down the Canada and Mexico tariffs, Because if you remember
Speaker 4: over the weekend, Howard luck Nick was saying that potentially
Speaker 4: there's some flexibility here, and so I'm looking to see
Speaker 4: if there's any additional statements that he says that Mexico
Speaker 4: and Canada can do. But I also remind folks that
Speaker 4: on April second, we have reciprocal tariffs. So if President
Speaker 4: Trump double downs and says, look, reciprocal tariffs are coming,
Speaker 4: I don't think you're going to see much of the
Speaker 4: way of this trade war ending anytime soon. The other
Speaker 4: thing that I think investors should pay attention to tonight
Speaker 4: is this tax reform debate, because President Trump has said
Speaker 4: certain things like, look, I don't want I want to
Speaker 4: make these four point five trillion dollars in tax cuts permanent.
Speaker 3: But at the same time, I don't want to touch
Speaker 3: medicaid spending.
Speaker 4: So I want to see direction from President Trump towards
Speaker 4: Congress and specifically those House Republicans, to see if he's
Speaker 4: going to put any leverage on them to support his
Speaker 4: goals there.
Speaker 5: So, what is the status of the tax package and
Speaker 5: the various economic packages, because a lot of folks Nathan
Speaker 5: and to telling me this is when the rubber's going
Speaker 5: to hit the road in terms of Democratics responses.
Speaker 4: Yeah, so you know, in terms of this tax passage,
Speaker 4: where we are is the House passed their budget resolution
Speaker 4: last week. Now, this wasn't a bill, this wasn't legislation.
Speaker 4: This was essentially a blueprint. And so what they said
Speaker 4: is here, go forth, and this gave instructions to eight
Speaker 4: House committees to go forth and look for two trillion
Speaker 4: dollars worth of tax or two trillion dollars worth of
Speaker 4: deficit reductions to offset the four point five trillion and
Speaker 4: the tax cuts are going to cost. Now, there's economic growth,
Speaker 4: there's tariff money, and all of it should come approximately close.
Speaker 4: The challenge is is that even though the House says
Speaker 4: that they want to get something done in April, if
Speaker 4: not May, the challenge is how are you going to
Speaker 4: pay for this and how are you going to get
Speaker 4: the entire caucus on CREED Because if you cut Medicaid,
Speaker 4: you've already lost several constituencies. If you increase the deficit,
Speaker 4: you lost others. So, you know, Speaker Johnson has this
Speaker 4: really tricky situation of trying to get everybody on the
Speaker 4: same page. What we're telling our clients is, look, there's
Speaker 4: no deadline here that's going to force the House Republicans
Speaker 4: to come up with a solution until the end of
Speaker 4: the year, So they have all this year to figure
Speaker 4: it out. So we don't think this is going to
Speaker 4: happen until the fourth quarter. We do think a package
Speaker 4: will eventually come together. We do think will you know,
Speaker 4: extend these Trump Are tax cuts, But we don't think
Speaker 4: it's going to change the Inflation Reduction Act all that much.
Speaker 4: We probably don't think it's going to change medicate all
Speaker 4: that much, you know. But again, it's hard to come
Speaker 4: up with specifics because they have the rest of the
Speaker 4: year to figure it out. It's just not going to
Speaker 4: happen in the timeframe that they're currently saying it's going to.
Speaker 2: Right and that therein lies the issue for the market.
Speaker 2: So the stuff that's negatively impacting the markets, like tariffs,
Speaker 2: Trump can do on his own and have an immediate effect.
Speaker 2: But the stuff you're talking about, like tax cuts that
Speaker 2: can have a stimulati effect on the markets can't be
Speaker 2: just done by President Trump, has to be done by Congress.
Speaker 2: So the longer that gap is, you have to wonder
Speaker 2: if it's going to be harder for the markets to digest.
Speaker 3: Yeah, absolutely so.
Speaker 4: If you think about twenty twenty five and think about catalysts,
Speaker 4: key things that are happening, you know, right now we're
Speaker 4: going through the tree. The trade war is probably the
Speaker 4: most important thing that's to the markets at this point
Speaker 4: because look, we're seeing it in real time. You know,
Speaker 4: we're seeing companies saying prices are going to go up.
Speaker 4: We're seeing the peso and the Canadian dollar go down.
Speaker 4: But then if you get longer term, we have you know,
Speaker 4: we have a government shutdown coming up March fourteenth, very
Speaker 4: little impact in markets. In fact, every single time this happens,
Speaker 4: we put out notes essentially saying there's no market impact
Speaker 4: from a government shutdown. Next after that you have the
Speaker 4: debt ceiling. This is probably June July you know, obviously,
Speaker 4: if you're on the fixed income side, you care very
Speaker 4: much about the debt ceiling. We think there's an eighty
Speaker 4: percent chance that debt ceiling is resolved with so weekend.
Speaker 4: Don't think it a lot of headline risk. We don't
Speaker 4: think there's really all that much to be concerned about.
Speaker 4: But then the next one is this tax reform debate
Speaker 4: that takes place towards the end of this year.
Speaker 3: So this terrify argument in terms of market angst.
Speaker 4: This is going to continue throughout the year because ultimately
Speaker 4: it's President Trump's decision on when in this trade war ends,
Speaker 4: and so there's a lot of uncertain certainties that are
Speaker 4: coming out from Washington right now.
Speaker 6: All Rightandean, thank you so much. We appreciate that.
Speaker 5: Nathan Dean, a Bloomberg Intelligence Senior policy analyst.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 5: We're at the Bloomberg invest Conference twenty twenty five. Are
Speaker 5: down there Lower Manhattan World Financial Center now known as
Speaker 5: Brookfield Place. Lots of smart people at this conference giving
Speaker 5: us the latest thoughts on what's going on in the
Speaker 5: world of global finance, including our next guest, Robert Rubin,
Speaker 5: senior counselor at Center View Partners send me to the
Speaker 5: US Secretary of the Treasury and also former a senior
Speaker 5: partner at Goldman Sachs.
Speaker 6: Bob, thanks so much for joining us here.
Speaker 5: There's a million topics we could go with you, but
Speaker 5: for better or worse, Bob, I think today is going
Speaker 5: to be known as tariff Tuesday when the tariffs hit.
Speaker 5: Financial markets are really waking up over the last several
Speaker 5: days and weeks about what this could mean for our
Speaker 5: economy in terms of growth.
Speaker 6: In terms of inflation.
Speaker 5: How do you think about tariffs in general and maybe
Speaker 5: how they're being used by this administration.
Speaker 7: Yeah, I think I think terriffs are exactly what you
Speaker 7: just said. I think they create a very serious risk
Speaker 7: of inflation, not only because prices of imported good will
Speaker 7: be higher, but domestic producers will be able to raise
Speaker 7: prices because their competitive prices will be higher. But also
Speaker 7: I think it's a substantial threat to growth because it
Speaker 7: can adversely affect productivity since you can no longer have
Speaker 7: access to whatever is the most efficient producer of good
Speaker 7: and services. And as you can see from today's papers,
Speaker 7: there's a very serious risk of retaliation, you know. More
Speaker 7: broadly though, and that's a serious set of risks right.
Speaker 7: More broadly, I think there's the risk of a trade war,
Speaker 7: and trade war could be tremendously against ours. This whole
Speaker 7: thing is against our self interest. And there's one more
Speaker 7: aspect to it though that unfortunately has not gotten much
Speaker 7: front focus. But should we have treaty agreements with Maganada
Speaker 7: and Mexico. We are now violating our commitments, our treaties,
Speaker 7: and what is that going to do to our credibility
Speaker 7: around the world, not only expect economic issues, but geopolitical interest.
Speaker 7: This is massively against our self interests.
Speaker 2: At the heart of what the trub administration is trying
Speaker 2: to do economically is pivot from fiscally funded economy to
Speaker 2: a privately funded economy, right at the heart. No, you
Speaker 2: don't think that's true.
Speaker 3: I have no idea what they're trying to do.
Speaker 2: There is an argument to be made, sure they know
Speaker 2: what they're trying to but there's an argument to be
Speaker 2: made that that's what they prefer, right, less fiscal stimulus
Speaker 2: and more private investment.
Speaker 7: And that's why Wait now, but wait a second, you
Speaker 7: say less fiscal stimulus. Yes, assuming that they get what
Speaker 7: they want in the reconciliation bill, that is to say,
Speaker 7: they get these large additional tax or the continuation of
Speaker 7: the tax cuts which would otherwise expire this year, that
Speaker 7: will substantially increase our deficits. The projections are that, independently
Speaker 7: of them, deficits going to continue to go up substantially,
Speaker 7: and with them even more so. So I would say
Speaker 7: they're on a fiscally irresponsible and I think very dangerous paths. Well,
Speaker 7: that's a continuation of conditions have been they're making the worse.
Speaker 5: So you mentioned the debt annual deficits. I've been on
Speaker 5: a wall street since nineteen eighty six. That's been a
Speaker 5: story since nineteen eighty six. It's probably well before. That
Speaker 5: is our scenario where we really have to pay attention to.
Speaker 7: Yeah, I think I think we're really I think we've
Speaker 7: been at that point for quite some time. But but
Speaker 7: but the we are about we're in new territory now.
Speaker 7: Roughly speaking, we're at historic highs in terms of the
Speaker 7: debt GDP ratio. The CBO projects that they're going to
Speaker 7: go from the current hundred percent to about one hundred
Speaker 7: and twenty percent ten years from now. But add independent
Speaker 7: analysts by looking at increase or likely increases in defense
Speaker 7: and interest rates, and it's costuil, et cetera. I think
Speaker 7: one hundred and thirty to one hundred and thirty five
Speaker 7: percent is more likely. I think it is enormously dangerous.
Speaker 7: And the policies of this administration, at least as currently projected,
Speaker 7: are going to make that worse.
Speaker 2: So how do we fix it? I mean, Ray Dalio
Speaker 2: said yesterday the debt crisis in three years could look
Speaker 2: like a heart attack.
Speaker 7: Yeah, I saw, I saw raise coment, So I'm not
Speaker 7: sure exactly where he gets that from, but anyway, but
Speaker 7: I think but I think it's sort of conception. At
Speaker 7: least he's right with the heart attack. I'm not sure
Speaker 7: I would use that analogy. I think Taylor and I
Speaker 7: think is more likely than raise will raise are very
Speaker 7: perceptive and stute observation observer.
Speaker 3: No.
Speaker 7: I think more likely is you'll have a higher interest rates,
Speaker 7: You'll have a reduced business confidence, you'll have fewer resources
Speaker 7: for public investment and national security, and that will happen
Speaker 7: over time. The risk is that at some point it
Speaker 7: becomes what Ragios said, which is a fiscal crisis. The
Speaker 7: problem is to deal with this. We can cut some expenses,
Speaker 7: but there's not that much to be cut. As a
Speaker 7: practical matter, it is very limited. Which you predominantly need
Speaker 7: are more revenues, and the politics of that are terrible.
Speaker 7: This administration says the tariffs because the more revenues. Two
Speaker 7: problems there. One is the rift will provide revenues, but
Speaker 7: same time they're going to adversely affect growth most likely,
Speaker 7: and if you look at models, and I have looked
Speaker 7: at models of this, the net effect is very small
Speaker 7: and secondly is highly adverse with respect to growth and inflation.
Speaker 7: And as I said a moment ago, it means a
Speaker 7: violation or that's what we're doing, a violation of treaty obligations,
Speaker 7: which then can affect our credibility around the world, which
Speaker 7: can affect us both that geo politically and economically.
Speaker 5: Another pillar of this administration is immigration, getting a maybe
Speaker 5: a stronger handle on immigration, legal and illegal, maybe even
Speaker 5: deporting some workers back. A lot of economists will say
Speaker 5: that's not good for the economy either. Because these folks
Speaker 5: are working, they're paying their Social Security taxes, they're doing
Speaker 5: jobs that Americans don't do. It's actually additive to the
Speaker 5: economy and keeping inflation down from wage inflation.
Speaker 6: How does that play into it?
Speaker 8: How do you? I think you that exactly right.
Speaker 7: If you look at the numbers over the last few
Speaker 7: years and you look at the growth we've had, which
Speaker 7: has been very good growth, some fair portion of that
Speaker 7: is because of immigration and the increase in the labor force. Furthermore,
Speaker 7: we've been having on the legal immigration side, people of
Speaker 7: all skill levels and a lot of very very highly
Speaker 7: skilled people have come into particular tech, but also across
Speaker 7: our economy. The illegal immigrants are more complicated question. But
Speaker 7: I think what you need to do is you need
Speaker 7: to approach that not from an ideological perspective, which I
Speaker 7: think is what's happening, but rather from an economic perspective
Speaker 7: and decide what, from a cost benefit perspective is in
Speaker 7: our self interest. And the answer to that is going
Speaker 7: to be I think at least a substantial you'll increase
Speaker 7: maybe the wrong word, but a robust policy respect legal immigration,
Speaker 7: and then an approach to those who are illegals who
Speaker 7: hear that it's based on the economic effects of.
Speaker 3: What we do.
Speaker 2: I am judging myself for asking you this question, but
Speaker 2: I feel like I have to because this is what
Speaker 2: people are actually talking about in terms of trun policy,
Speaker 2: and that's the mar A Lago accord idea that potentially
Speaker 2: you'll see, you know, a big deal among major economies
Speaker 2: to address the exchange rate and trade imbalances. You can
Speaker 2: have a trade war and not have a stronger dollar,
Speaker 2: et cetera. Is anything like that something that you are
Speaker 2: listening to talking about, like a Plaza accord a lla
Speaker 2: decades ago.
Speaker 7: Well, a Plasa acord wasn't. It was a very different
Speaker 7: set of circumstances. I'm not sure what they're driving at,
Speaker 7: but whatever it is, I don't think they're going to
Speaker 7: get there this.
Speaker 6: Way, you know.
Speaker 7: Aside from which I think there's a lot of ideology
Speaker 7: about all of this. If you have trade deficits, and
Speaker 7: what's happening is you have an influx of capital and
Speaker 7: then it goes into investment that actually improves growth in
Speaker 7: the United States and is good for US. Now, if
Speaker 7: it goes into consumption, then eventually you build up and
Speaker 7: if course into investment, then you have additional growth and
Speaker 7: you can pay back the debt. If it goes into consumption,
Speaker 7: then you don't have the growth. Then you don't be
Speaker 7: able to pay back in over time. That creates a problem.
Speaker 7: But whatever you want to do, you do not want
Speaker 7: to approach it through tariffs, and you don't want to
Speaker 7: approach it through browbeating other countries or taking taking advantage
Speaker 7: of what is a strong position of our economy.
Speaker 6: You want.
Speaker 7: What you want to do is just want to increase
Speaker 7: productivity in this country and increase savings.
Speaker 6: AI.
Speaker 5: You told us offline that you've been really spending a
Speaker 5: lot of time trying to get educated on AI.
Speaker 6: What is your We've got a full minute here. What
Speaker 6: do you think about it?
Speaker 7: I know i'll give you my views. About a year
Speaker 7: and a half ago I thought to myself, Hey, it
Speaker 7: looks to me like it's going to be really important.
Speaker 7: So about a year and a half ago I started
Speaker 7: taking to tutorial. I go twice a week, an hour
Speaker 7: each time, and I don't profess any expertise in it,
Speaker 7: but I think I've become reasonably conversant with it, and
Speaker 7: I think it's going to change life as we know
Speaker 7: it economically, geopolitically and societally. And I think the I
Speaker 7: don't think we're already for all of the effects it
Speaker 7: can have.
Speaker 2: Oh, what's an AI to tour? What do you is it?
Speaker 2: Some guy at your desk like going.
Speaker 6: Over to no, no, tayb what it is?
Speaker 7: It's extremely bright guy and we do it on zoom
Speaker 7: and he's taken me through the underpinnings.
Speaker 3: How does it work?
Speaker 7: And then what are the use cases?
Speaker 8: What effects does it have?
Speaker 7: And the more you get it, I would strongly recommend
Speaker 7: reading a book that's been recently published by Eric Schmitt
Speaker 7: and Eric Kissinger. And what they do is they go
Speaker 7: they go through what AI and when it is, but
Speaker 7: basically it goes to the ramifications the potential effects of AI.
Speaker 7: It's really enormously worth reing. This is going to shape,
Speaker 7: in my opinion, at least have profound effects on pretty
Speaker 7: much everything we do over time.
Speaker 5: Yep, that's what we're hearing from a lot of smart
Speaker 5: people as well. Robert Ribband, thank you so much for
Speaker 5: joining us. Really appreciate it. Robert Ribin, he's a senior
Speaker 5: counselor Centerview partner seventieth US Secretary of Treasury and of course,
Speaker 5: former senior partner at Goldman Sachs. We appreciate getting some
Speaker 5: of his time talking about some of these markets.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
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Speaker 2: Alex youl Parls we need. This is Bloomberg Intelligence Radio.
Speaker 2: We are broadcasting to you live from the New York
Speaker 2: Financial District with the Bloomberg and Best Conference twenty twenty five,
Speaker 2: bringing together financial leaders, asset managers, private wealth, private equity,
Speaker 2: as well as banking together to talk about the main
Speaker 2: issues of our time, and we have one of them
Speaker 2: here right with us. Mark Mahaney is senior managing director
Speaker 2: at Evercore ISSI. Perfect day to talk to you. Nastek
Speaker 2: one hundred now below it's two hundred day moving average.
Speaker 2: The pressure not abating. What is put in particular leading
Speaker 2: the tech part of the selloff?
Speaker 6: Maybe two things.
Speaker 9: One is that it's a sector with that's had phenomenal
Speaker 9: outperformance for the last two and a half years, So
Speaker 9: in reversion to the mean trade, you revert down the
Speaker 9: stocks that aboutperformed the most. That's true, they've had phenomenal
Speaker 9: performance since the middle of twenty two since Interra straight
Speaker 9: stopped spiking. And then the second thing is, you know
Speaker 9: when the tariff issues these that's wrong. Especially the tech
Speaker 9: leaders are dramatically global companies. Half of their revenue or
Speaker 9: more comes from overseas. Amazon has doing a lot of
Speaker 9: retail obviously from China, but you know through Mexico and Canada.
Speaker 9: Anything sort of ter if issues would upend their business somewhat,
Speaker 9: depending on how well hedged they are, just as it
Speaker 9: would for any major retailer. So I think those two
Speaker 9: issues coming together or what's derailling those stocks right now?
Speaker 5: Mark, You've been covering the tech sector for a long time.
Speaker 5: You were there at the beginning of the Internet. A
Speaker 5: lot of people are comparing AI to the Internet in
Speaker 5: terms of the ability to transform many aspects of life.
Speaker 5: How do you package that AI story for your clients
Speaker 5: these days?
Speaker 9: I don't know if it will be that transformative, but
Speaker 9: the amount of money that's going into them paid by companies,
Speaker 9: put in by companies that have plenty of cash is
Speaker 9: something of a tell. And then we've seen a lot
Speaker 9: of examples of what I call ROAI, you know, ROI
Speaker 9: return on investment ROAI. So you know we're staring at
Speaker 9: it right now. Look at what's happened at Meta in
Speaker 9: the last two and a half years, how they've turned
Speaker 9: around their business and both and they've dramatically improved their
Speaker 9: services for customers, that's you and me as consumers. Our
Speaker 9: news feed has gotten to become more relevant because they've
Speaker 9: used AI to do better targeting, better recommendations. But also
Speaker 9: for advertisers, their return on ads ben row as has
Speaker 9: risen because the campaigns have become better targeted, better management,
Speaker 9: better managed. So I've seen a couple of really great
Speaker 9: ROAI examples, and so I'm not sure it's transformative, but
Speaker 9: it's definitely improving the performance of these companies and it
Speaker 9: shows up in the P and L two. I think
Speaker 9: you can also look at Google. Twenty five percent of
Speaker 9: their code is now written by AI. Imagine the productivity
Speaker 9: improvement associated with that. And then Amazon is talking about
Speaker 9: twenty five percent lower cost to serve in its most
Speaker 9: advanced distribution centers. I mean, that's why their margins are
Speaker 9: going to continue to go up, so you're seeing it
Speaker 9: in the P and L. So I think it it's
Speaker 9: actually a major productivity improvement, and I think this is
Speaker 9: going to play out for years we do.
Speaker 2: As in breaking news for you this according to the
Speaker 2: Wall Street Journal that Ontario is going to issue twenty
Speaker 2: five percent export tax on electricity to the US. Canada
Speaker 2: in particular, not only does it have oil, it has
Speaker 2: a lot of hydropower, so they're going to be taxing
Speaker 2: electricity to the US. Here we go. Okay, So back
Speaker 2: to AI and the transformative part of it and how
Speaker 2: it's going to trickle out through the economy. When do
Speaker 2: you think we're going to really understand how inferencing is
Speaker 2: going to impact us and companies? And like, when are
Speaker 2: you going to get me to buy into an AI story?
Speaker 9: Well, I tried to lay out a couple of examples
Speaker 9: already of where these companies are deploying AI and machine learning,
Speaker 9: and they have been for quite some time. We've just
Speaker 9: had a step up like a hockey stick improvement you
Speaker 9: just mentioned Canada, hockey stick inflection up in productivity gains
Speaker 9: because with these companies. So I'm sorry, I think we're
Speaker 9: already starting to see it, and I think we're seeing.
Speaker 2: It in I see it. I mean maybe my news feed,
Speaker 2: but well I pay for it.
Speaker 9: Well, you want some really specific product examples, I got
Speaker 9: a really fun one for you.
Speaker 2: Okay, into it.
Speaker 9: You want to learn languages, there's this wonderful app called
Speaker 9: dual Lingo. You want to really learn a language, pay
Speaker 9: up for Duelingo Max, where you can use an AI
Speaker 9: generated bot to actually practice your French, your Spanish, your German,
Speaker 9: your Russian, whatever we need to learn these days. Anyway,
Speaker 9: and I think you're going to see more of these
Speaker 9: kind of little one off examples. But you know, from
Speaker 9: a company's perspective, anything that produces internal productivity, improves relations
Speaker 9: with suppliers or customers, I mean all of that. I
Speaker 9: don't think there's one. I don't think there's one AI
Speaker 9: revenue build. But you'll see a couple of products that
Speaker 9: wouldn't exist, and I do A lingo example is one
Speaker 9: that wouldn't simply wouldn't exist if you didn't have AI.
Speaker 5: How about for Google and a traditional search business, is
Speaker 5: AI a threat to Google or not?
Speaker 9: Google just put out a blog that said that because
Speaker 9: of AI overviews that they're actually seeing more commercial search queries.
Speaker 8: Really that.
Speaker 9: Should raise all of our eyes. So and I guess
Speaker 9: I'm not. At the end of the day, not surprise.
Speaker 9: Google is a company that just consistently improved the product,
Speaker 9: made the search results faster and faster and more relevant.
Speaker 9: This just took it up a notch. And so yeah,
Speaker 9: if they can get you the result you want more quickly,
Speaker 9: especially if it's leading to more commercial searches, Google is
Speaker 9: the one company in the world that knows how to
Speaker 9: monetize commercial searches.
Speaker 2: What do you think is the biggest misconception about AI,
Speaker 2: Whether it's like what investors thing, what's priced into the stock,
Speaker 2: or just conceptually.
Speaker 9: I think the biggest mistakes misconception probably occurred about three
Speaker 9: weeks ago when Deep Sea came out and there was
Speaker 9: concern that this would be highly disruptive for the hyperscalers.
Speaker 9: I actually took the exact opposite view, especially if you're
Speaker 9: at the application layer, and because the infrastructure potentially.
Speaker 3: Just got a lot cheaper.
Speaker 9: So you're going to all that money that you've spent
Speaker 9: on capex, You're going to get a better return that
Speaker 9: money was and wasted. You're going to get a better
Speaker 9: return than you would have had in the past. So
Speaker 9: I think that's probably the biggest recent misconception I've seen.
Speaker 5: For Meta It's had a great turnaround, as you talked about,
Speaker 5: what percentage of that turnaround is simply cost cutting versus
Speaker 5: maybe just stepping away from the metaverse discussion somewhat.
Speaker 6: I think it's two or three things.
Speaker 9: Stepping away from metaverse, focusing on the year of efficiency
Speaker 9: that Zuckerberg talked about the beginning of twenty three and
Speaker 9: now it's become the years of efficiency, and I think
Speaker 9: this does tie back into the AI. I mean, there
Speaker 9: has been a mind shift at Silicon Valley. It's not
Speaker 9: growth at all costs as much more of a focus
Speaker 9: on So there's a cultural shift I think is probably good.
Speaker 9: These companies are going through their middle life stages, not
Speaker 9: crisis but stages, and as they do that, they should
Speaker 9: they should be spending much less aggressively on growth. They
Speaker 9: should be focused more on profitability than they are. But
Speaker 9: then the tie into AI is their developers can produce
Speaker 9: more code with your developers, it's just not like they
Speaker 9: need to cut people from this point on, but they
Speaker 9: can grow. They can sustain growth with less need to
Speaker 9: add headcount than they did in the past.
Speaker 2: All right, Mark, such a pleasure, really really great to
Speaker 2: see you in person. Thank you. Mark Mahoney, Senior Managing
Speaker 2: Director over at evercore is Side.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 2: A Happy Tuesday Tough tape if you're looking at the
Speaker 2: equity market. We're live from the Bloomberg and Best Conference
Speaker 2: twenty twenty five. We have all the top minds and
Speaker 2: finance talking about the pressing issues, not only how to
Speaker 2: invest money, but the future of some of the significant
Speaker 2: things and the transition that we're going through, like for
Speaker 2: example AI. And here joining us on set is Ben Wren.
Speaker 2: He's founder and CEO of Sigtech.
Speaker 6: Now.
Speaker 2: Sigtech is a London based fintech company spun out of
Speaker 2: Revin Howard in twenty nineteen, and it basically tries to
Speaker 2: help quants and users manage the capital markets. I'm not
Speaker 2: really sure I know what that means. So luckily beIN
Speaker 2: is here for us, all right, so give us the
Speaker 2: quick pitch on what your company actually does, sigtug.
Speaker 10: We build specialist agents these days to help people make
Speaker 10: better decisions in cup to markets, but also to automate
Speaker 10: a lot of the very high value intellectual but not
Speaker 10: very creative workflows. You know, we can reduce a lot
Speaker 10: of the things people do today, which a bit boring,
Speaker 10: you know, down from many hours to thirty seconds. I
Speaker 10: think that makes a big difference in terms of productivities.
Speaker 5: All right, here's here's an example that I can think
Speaker 5: of for my okay to being at the printer not
Speaker 5: far from here, a couple of blocks from here, don
Speaker 5: Winny at the two three o'clock in the morning going
Speaker 5: over a bond perspectus.
Speaker 6: That's probably something that AI can help with. So how
Speaker 6: much our asset.
Speaker 5: Managers, generally speaking, how much are they using tech technology
Speaker 5: today help computerize it?
Speaker 6: Is it help quantitative?
Speaker 3: Is it?
Speaker 10: I think in the last fifteen years there's a big
Speaker 10: trend in asset management to to adopt more and more technology.
Speaker 10: And we can see this shift in terms of, you know,
Speaker 10: people using more data driven investment processes and people hire
Speaker 10: data analysts and but Jenny and I Jenei in the
Speaker 10: last few years is a big step change. It's I
Speaker 10: would say it's it's an unprecedented, unprecedented change in in
Speaker 10: this trend, just in terms of it's no longer incremental.
Speaker 10: There's a before and after. And you know, when we
Speaker 10: when we think about previous technologies, you know, we mainly
Speaker 10: focus on what we call explicit knowledge, knowledge that we
Speaker 10: can codify, describe, and therefore use programming language to automate.
Speaker 10: But only until now we're able to distill and automate
Speaker 10: so called tested knowledge, the knowledge that resides in our head,
Speaker 10: but we can't really so easily write it down and
Speaker 10: describe and code. But now we can actually automate those
Speaker 10: and there are plenty of those workflows and processes, especially
Speaker 10: in financial services.
Speaker 2: So how would you help, like a regular quant manager,
Speaker 2: like I go to you and I'm like, hey, I
Speaker 2: need your product to help me get better, faster, find
Speaker 2: better trends in the market.
Speaker 10: Yeah, for quants, I think quants started with more number driven.
Speaker 10: You know, trend following is if you do it like
Speaker 10: in a very simple way, it's entirely number driven. But
Speaker 10: these days we are moving to a world where we
Speaker 10: have to deal with numbers and text as too modalities
Speaker 10: at the same time, which no longer just about technical analysis,
Speaker 10: but it's also about absorbing new information and turn you know,
Speaker 10: non numerical information into numerical information. And that's something that
Speaker 10: Jen and I does really well because fundamentally, if you
Speaker 10: think about how it's trained, it has been trained on
Speaker 10: trillions of tokens of textual days and a lot of
Speaker 10: things we used to do either bespoke or preparatory fashion.
Speaker 10: This day we get out of box, such as sentiment
Speaker 10: analysis or extracting relative and information from very long pieces
Speaker 10: of text. These sort of things actually change how qualms,
Speaker 10: even how quants approach their daily jobs.
Speaker 5: Are the big Wall Street firms making these investments or
Speaker 5: is it more of the hedge fund community that is
Speaker 5: more receptive?
Speaker 6: Who are your customers?
Speaker 3: Typically?
Speaker 10: So these days we mainly focus on buyside, okay, but
Speaker 10: we also have very big clients in terms of in
Speaker 10: terms of like commercial banks, you know, using our technology
Speaker 10: to completely change how they underwrite commercial loans. I think
Speaker 10: so I wouldn't say it's a cell side or buyside
Speaker 10: or big firm or small firm.
Speaker 6: I don't think that's the main reason.
Speaker 10: In terms of adoption. I would say the main reason
Speaker 10: is is the leadership. You know, when when you approach
Speaker 10: something so unprecedented, it takes some time to build a
Speaker 10: consensus inside the organization about you know, what's the strategy,
Speaker 10: what do we do? But you know that may take
Speaker 10: two months, three months, and given how fast things change
Speaker 10: after three months is a different world. Yeah, right, So
Speaker 10: it really takes some kind of conviction from a visionary
Speaker 10: leadership team to adopt this technology very confidently.
Speaker 2: Yeah, for twenty four hours, it can be a different
Speaker 2: investing landscape. So what's the best partnership between AI and humans?
Speaker 2: Fifty to fifty? Is it AI seventy five percent of
Speaker 2: the decision making process twenty five percent for human How
Speaker 2: do you think about that?
Speaker 8: Yeah?
Speaker 10: I think if I think about the knowledge work we
Speaker 10: do every day, I would describe them as most of
Speaker 10: them may be not creative, but intellectual. Right, analyze a
Speaker 10: lot of documents picking out the right information is intellectual,
Speaker 10: but it's not creative. So in the future, humans should
Speaker 10: devote almost all the time to creative stuff what makes
Speaker 10: us different, whereas the boring intellectual stuff can be automated
Speaker 10: by AI agents. On the other hand, we are certainly
Speaker 10: seeing a big change in the user experience, the user
Speaker 10: interface because you know, up to on to this point,
Speaker 10: people approach GENI and mainly through a chetbot. You know,
Speaker 10: there's a chat box. You're typing into it to get
Speaker 10: some response. It's very nice and it's really started the error.
Speaker 10: But going forward, we are looking at a user user
Speaker 10: interface that allow human to essentially collaborate with a large
Speaker 10: number of AI agents who specialize in different things. So
Speaker 10: how does that user interface look like, and how does
Speaker 10: that AI human fusion intelligence look like. It's a very
Speaker 10: active field of research, trial and errors.
Speaker 5: So this sounds like from what I understand of AI,
Speaker 5: a lot of computing power requirements. Talk about the investments
Speaker 5: that you think these financial firms need to make are
Speaker 5: making or you know, maybe need to step up.
Speaker 10: Yeah, in terms of intelligence, and the way I think
Speaker 10: about it is so it's very similar to electricity. You
Speaker 10: know that we are currently in the in the first
Speaker 10: stage of investing in the infrastructure, right and if you're
Speaker 10: going back in history in the last two hundred years
Speaker 10: and then the way we started building electric electricity grid
Speaker 10: there's one magical number which is one percent. You know,
Speaker 10: the countries throughout the history spent about one percent of
Speaker 10: nominal GDP on building power grid from two hundred years
Speaker 10: ago in Britain all the way to today.
Speaker 8: So the Big Tech this.
Speaker 10: Year announced three hundred billion dollars of investment into Genini
Speaker 10: data centers. That's almost exactly one percent of the US
Speaker 10: GDP today it's about thirty trillions. So in terms of
Speaker 10: infrastructure investment, we are there, and people are building incredibly
Speaker 10: big mega AI clusters across the country now. But we
Speaker 10: are shifting toward the application lay right because once you
Speaker 10: have electricity, it's not about electricity per se, it's about
Speaker 10: what kind of appliances you can build powered by electricity.
Speaker 10: So we are moving into that stage too, where there
Speaker 10: are a lot of investments both in terms of talent
Speaker 10: and capital into building the right applications that they actually
Speaker 10: make a big difference to the knowledge workers in term
Speaker 10: the productivity. So we are we are starting that phase.
Speaker 2: Last question here for US, I asked Sir Mark Mahiney too,
Speaker 2: is what's the biggest misconsumption right now when it comes
Speaker 2: to AI and using it.
Speaker 10: I think the biggest conception is I think people tend
Speaker 10: to either underappreciate its capabilities or sometimes getting over optimistic,
Speaker 10: and it's it's quite hard to get it right.
Speaker 2: So it's too much or too little.
Speaker 10: So I mean, I think most people are either under
Speaker 10: you know, under hyping it.
Speaker 6: Or over hyping it.
Speaker 10: It's very hard to get it right. But one thing
Speaker 10: is very obvious to us is that the pace of
Speaker 10: the change is unprecedented and it's getting better. Like the
Speaker 10: Deep Seek just introduced open sourced all their efficiency engineering
Speaker 10: tricks to the whole world and then everybody is going
Speaker 10: to adopt it. So all of this is pushing the
Speaker 10: efficiency frontier. So we're getting better and faster every day,
Speaker 10: so people should be prepared for the big change.
Speaker 2: All right, Ben, thanks a lot. We really appreciate it
Speaker 2: being run. He's founder and CEO of sig Tech. It's
Speaker 2: like a Goldilock thing. It's like no one actually knows.
Speaker 2: So it's either going to change the universe or it's
Speaker 2: going to.
Speaker 6: Ruin it center between a billion of capex.
Speaker 2: Yeah, that is definitely not chump change.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 6: Out Steve Paul Sweeney.
Speaker 5: We are live here at the Bloomberg Invested twenty twenty
Speaker 5: five conference down here at Brookville Place, formerly known as
Speaker 5: World Financial Center. I used to hang a shingle down
Speaker 5: here at MARYLN back in the day, so some good
Speaker 5: memories here. I tell you, if I were to come
Speaker 5: back on the street, Alex, again, I'm telling you, private
Speaker 5: credit might be the place I go.
Speaker 6: I mean I went.
Speaker 5: I went to the Chase Manhattan Bank credit training program,
Speaker 5: the best on the street.
Speaker 6: I could go run circles around these guys. I should
Speaker 6: have done that.
Speaker 5: Mark Clipschiltz Joints is his CEO blue Al Capital, speaking
Speaker 5: here at our conference here today.
Speaker 6: We appreciate getting a few minutes of your time.
Speaker 5: Mark, talk to us about blue Out how you guys
Speaker 5: fit into the private credit business, because Alex, I are
Speaker 5: just amazed at the funds that are flowing into that market.
Speaker 11: Well, first I have to find out how to recruit
Speaker 11: you to join bacause for.
Speaker 6: The best of the best credit training.
Speaker 11: And I also want to say it's great to be
Speaker 11: back down here. My first apartment in New York when
Speaker 11: I moved here in nineteen ninety one to work at
Speaker 11: Golden Sacks, when it was an eighty five broad street
Speaker 11: right down that.
Speaker 5: Street, I mean too, that's where Solomon Blows put us
Speaker 5: up back in the day, so I could say I
Speaker 5: live down here at a water view and.
Speaker 6: All that kind of stuff.
Speaker 5: Lovely private credit, You guys are just part of just
Speaker 5: an amazing asset class.
Speaker 11: Well, we've been very fortunate to be part of an
Speaker 11: asset class, and you know, I play our role in
Speaker 11: helping evolve it. Look, private credit, to set the stage
Speaker 11: right is about taking long term capital from investors, and
Speaker 11: we've tried to broaden the range of people that have
Speaker 11: access to it and.
Speaker 8: To be able to provide that capital.
Speaker 11: To corporate users to support their growth with a view
Speaker 11: to the long term. And to be here on a
Speaker 11: day when you know the public market is so volatile,
Speaker 11: you know, in some ways is very much a reminder
Speaker 11: of why private credit works for investors, but also why
Speaker 11: it's important because look, we're doing business today. We're making
Speaker 11: loans today, just like we were yesterday, just like we
Speaker 11: will tomorrow. You know, screen rater screen blue, screen green
Speaker 11: prefer green.
Speaker 2: I should disclose that to my money manager. I do
Speaker 2: own shares in blue out private credit. I do have
Speaker 2: some of that feel like I need to say that
Speaker 2: thank you, but not through me, It's through my money guy.
Speaker 2: So help me understand the competitive landscape though, because it
Speaker 2: feels like banks now want to get a slice of
Speaker 2: the private credit market that they had to give up,
Speaker 2: and now we're seeing some partnerships with private credit shops.
Speaker 2: How do you look at it?
Speaker 11: Yeah, the evolving landscape with the banks is pretty interesting.
Speaker 11: Let's make a couple observations. The word like referencing the
Speaker 11: bank market I think is worth unpacking a little bit because,
Speaker 11: as obviously you will know, when we go back to
Speaker 11: thirty years ago, I started in the private markets. The
Speaker 11: alternative market wasn't called that at the time, and we
Speaker 11: actually borrowed money from the banks when we were doing
Speaker 11: an LBO as it was called then, literally from their
Speaker 11: balance sheets. That over the last thirty years has been
Speaker 11: on a long trajectory changing from being a lender to
Speaker 11: now the banks don't lend to these companies at all.
Speaker 11: And that's been true for a while. They intermediate, right,
Speaker 11: they'll go in and they'll underwrite a loan and then
Speaker 11: sell it into the market, cut it into pieces and
Speaker 11: sell it. And so in that regard, of course, that's
Speaker 11: an alternative way to finance a business, and we could
Speaker 11: talk about the pluses and minuses of both.
Speaker 8: It's great to have both markets.
Speaker 11: You want to have a good, vibrant bank intermediated market.
Speaker 11: But remember what the bank cares about is can I
Speaker 11: underwrite the loan and sell it in the next sixty days.
Speaker 11: So the red screen today is dramatic for a decision
Speaker 11: for a bank to underwrite a loan.
Speaker 8: On the other hand, word at the.
Speaker 11: Exact opposite, it doesn't really matter to us what's happening
Speaker 11: in the market today. What matters to us is do
Speaker 11: we get paid back five, six, seven years from out.
Speaker 11: That's our decision, that's what we're focused on. So in
Speaker 11: that sense, we really live in kind of with different
Speaker 11: incentives and serve a different function. However, to the good point,
Speaker 11: the banks are saying, okay, but turns out private credit
Speaker 11: really does work.
Speaker 6: Right.
Speaker 11: They spent a lot of time criticizing the market and
Speaker 11: trying different ways to maybe scare up the boogeyman, but
Speaker 11: now they in fact are actually launching funds to do
Speaker 11: private credit so I'd start with, look, if can't beat them,
Speaker 11: join them, and we that's great, We'll take the endorsement
Speaker 11: of the market.
Speaker 8: It's a big world credit, it's a.
Speaker 11: Multi trillion dollar asset class, multi trillion dollar marketplace. We
Speaker 11: need vibrant available capital and having bank.
Speaker 8: Launch a fund, you know great.
Speaker 11: There's a lot of funds in the world, and some
Speaker 11: of those will be done in partnerships as you noted,
Speaker 11: and some will just be standalone efforts, and some will
Speaker 11: just continue to stay the course and do their traditional underwriting.
Speaker 6: What's a typical deal for blue out these days?
Speaker 11: So a typical deal for us. And this has been
Speaker 11: true for us from the beginning. Obviously the attributes and
Speaker 11: the size have changed. But over the last roughly ten
Speaker 11: years that we've built Blue Owl, our reason to be
Speaker 11: was to come in and say, look, we want private
Speaker 11: credit to become the lender of first choice as opposed
Speaker 11: to the lender of last resort, and private credit, if
Speaker 11: you go back before that time, was really a lender
Speaker 11: of last resort. It's where you went if you couldn't
Speaker 11: get money from a mainstream source. As I said, I
Speaker 11: was at KKR for twenty one years and during that time.
Speaker 11: I don't recall ever working with a lender that just
Speaker 11: was the once you did if you were a mainstream borrower.
Speaker 8: But the idea for Blualla.
Speaker 11: And today so to answer this question has been to
Speaker 11: create actually a real value proposition in having a partner
Speaker 11: to really work with a long dated capital pool for
Speaker 11: someone who has long dated needs and long dated ambitions
Speaker 11: with their business. So our typical company today often backed
Speaker 11: by a private equity firm, a sponsor. Sometimes it's just
Speaker 11: private family owned businesses or other corporate enterprises, but typically
Speaker 11: a private equity backed business and they're buying a very
Speaker 11: large company and they're looking for a long term partner
Speaker 11: to buy it. So typically when we do a transaction,
Speaker 11: we're lending maybe forty percent of the purchase price and
Speaker 11: the buyer is putting up sixty percent of the capital.
Speaker 11: So that's a very very low leverage structure compared to
Speaker 11: what people are used to.
Speaker 8: If you go back again ten years and twenty.
Speaker 11: Years, and the company today, our average company in our
Speaker 11: portfolio has over two hundred million dollars of ibadag. I mean,
Speaker 11: these are big companies today, and that's been a dramatic
Speaker 11: shift from ten years ago when it was really a
Speaker 11: market for smaller businesses.
Speaker 2: So let's get to that five to seven year time horizon,
Speaker 2: because ten years ago that's the exact same conversation I'd
Speaker 2: be having with private equity, right, and then we see
Speaker 2: where things get tough and things get stickier, when vintages
Speaker 2: don't work out or there come under different times of
Speaker 2: market stress. How does that apply to the credit space?
Speaker 11: So I think it applies for sure in the sense
Speaker 11: that every market evolves. In every market we'll have it's
Speaker 11: maybe slightly higher and lower moments, but there's an important distinction. Okay,
Speaker 11: at the end of the day, private equity, if I
Speaker 11: kind of use this metaphor, private equity, which is a
Speaker 11: business I personally participated in for decades, is about mining
Speaker 11: for gold. Right, It's about going out and maybe in
Speaker 11: our simplified parlance, might call and to get rich strategies.
Speaker 11: How do you out there and shoot the moon on
Speaker 11: great returns? So they're mining for gold. Our business in
Speaker 11: price credit is to be the picks and shovels provider
Speaker 11: to those miners. So we're not trying to find a
Speaker 11: big gold vein. We're not betting on the price of
Speaker 11: gold what we're saying is if the miners are active,
Speaker 11: and miners in this case would be any corporate user
Speaker 11: of capital, so they are always active, we want to
Speaker 11: supply them, and we take a less risky position, and
Speaker 11: we expect a corollary attractive return. So on the one hand,
Speaker 11: of course, every market evolves, and I want to suggest
Speaker 11: anybody that lives in a vacuum. But the purpose of
Speaker 11: our strategies and the purpose of private credit from private
Speaker 11: credit from an investor's point of view, is to have
Speaker 11: something that's much more about downside protection, stability and income
Speaker 11: generation through times of uncertainty, which is a bit why
Speaker 11: I say this sort of red environment. Today is actually
Speaker 11: a good time to have the conversation because what we're
Speaker 11: trying to build our portfolios and successfully have down over
Speaker 11: one hundred billion dollars of loans, and our running loss
Speaker 11: rates have been eleven basis points, and I think it
Speaker 11: speaks to the idea that this is about durability and
Speaker 11: predictability when times are uncertain. And I think it's probably
Speaker 11: safe to say today everyone's looking around saying, gosh, it
Speaker 11: feels uncertain out there.
Speaker 6: Mark, we got about a minute left.
Speaker 5: What do you say to those folks who say, as
Speaker 5: the business evolves.
Speaker 6: The dollars get bigger, regulation is needed. What do you
Speaker 6: say to those folks.
Speaker 11: Well, we're a highly regulated business as is, so you
Speaker 11: know today, Look, we're regulated by the SEC. We're a
Speaker 11: public company as a manager, we have public vehicles, we
Speaker 11: have a lot of regulators we work.
Speaker 8: With constructively, happy to do it.
Speaker 11: I don't think if what we mean by more regulation
Speaker 11: is more direction from sort of a central source as
Speaker 11: to what you should or shouldn't lend money to Remember,
Speaker 11: when we look back where the sources of problems have been,
Speaker 11: they actually tend to be in the regulated institutions, not outside.
Speaker 8: Even recently.
Speaker 11: Of course, everyone remembers the financial crisis, but don't forget
Speaker 11: over the last few years as private credit has thrived.
Speaker 11: One of the moments we worked through was the run
Speaker 11: on the bank at Silicon Valley Bank. So you know,
Speaker 11: what's old is new. If you have one day capital
Speaker 11: and you do long term things with it, that's challenging.
Speaker 11: We have long term capital to do long term things,
Speaker 11: So I think at the end of the day, look,
Speaker 11: we don't touch depositors. We're not systemic. So it's a
Speaker 11: nice compliment to a traditional banking market and a public marketplace.
Speaker 6: Great stuff, Mark, thank you so much for your time.
Speaker 5: Market lipshoalw It's Blue Out Capital co CEO talking about
Speaker 5: the private credit business and what a growth business it
Speaker 5: has been for sure.
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