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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. Hey,

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Speaker 1: we actually have an IPO to talk about, a big

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Speaker 1: one coming up here. We want to get right to it.

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Speaker 1: Billy Lipschultz, he covers all that IPO stuff and all

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Speaker 1: the new market stuff for Bloomberg News. He joined us

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Speaker 1: here in our Bloomberg Interactive Broker studio. All right, so,

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Speaker 1: Bailly arm, it's part of the soft bank. They need

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Speaker 1: to convince the market that as a chip designer, they

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Speaker 1: are a great play on AI. How did they do that?

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Speaker 3: The big sales pitch is being in AI, being in

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Speaker 3: machine learning, being in and we looked at the filings

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Speaker 3: the company actually only mentioned AI about fifty times. But

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Speaker 3: the big focus will be when they're talking to investors

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Speaker 3: is how they can get and become really a staple

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Speaker 3: of those chips that are going to increasingly be used

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Speaker 3: to bring AI to things like your cell phone and

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Speaker 3: be able to incorporate their technology into data centers, which

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Speaker 3: obviously are very very lucrative for the technology in the

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Speaker 3: semiconductor space now.

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Speaker 1: So the challenge there for sorry rot but is because

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Speaker 1: the challenge is, if I'm sitting on the other side

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Speaker 1: of the table or I'm at the Rubber Chicken lunch

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Speaker 1: in New York, my thing is, but you guys aren't.

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Speaker 1: So I have to believe that you aren't now really

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Speaker 1: an AI play, but I have to believe that you're

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Speaker 1: going to get there right.

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Speaker 3: Yeah, And they, according to their data, are in something

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Speaker 3: like ninety nine percent of smartphones. So their whole pitch

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Speaker 3: is that smartphone market is drying. We've seen that play

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Speaker 3: out with earnings from Qualcom, earnings from Apple. Well, now

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Speaker 3: they're trying to skate to where the puck's going to

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Speaker 3: be data centers AI and being able to use their

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Speaker 3: technology and have customers used their blueprints, which they sell,

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Speaker 3: collect royalties, some nice royalties off of other companies using that,

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Speaker 3: and that's kind of where they're trying to position themselves,

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Speaker 3: really not saying in video is one of their many customers,

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Speaker 3: but they name dropped in Vida a few times as

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Speaker 3: people who they're operating and working with and letting them

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Speaker 3: use some of their AI technologies.

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Speaker 2: So what has in Nvidia said about ARM? I mean,

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Speaker 2: aren't the two pretty closely connected more than just sort

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Speaker 2: of a customer relationship.

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Speaker 3: And Video was set up to buy the company a

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Speaker 3: few years ago and that deal fell apart. The big

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Speaker 3: thing when you look at some of these Bloomberg reports

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Speaker 3: is that ARM is talking to what they're framing as

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Speaker 3: strategic investors in Vidia, according to Bloomberg reports, among those

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Speaker 3: potential investors alongside the likes of Amazon and Intel, to

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Speaker 3: actually buy into the IPO. So you're trying to look

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Speaker 3: at the way ARMS positioning itself to benefit from not

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Speaker 3: only selling to these customers and benefiting from their sales,

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Speaker 3: but also getting them to buy into the stock, which

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Speaker 3: creates kind of that familial environment for soft Bank, which

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Speaker 3: has had a pretty rough go losing thirty billion dollars

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Speaker 3: last year.

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Speaker 1: Yeah, this would be a big home run for them.

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Speaker 1: Great great story related to this on the Bloomberg terminal

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Speaker 1: by my buddy Alex Barinka and min Yng Lee. It

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Speaker 1: says ARM needed thirty five hundred words to explain it's

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Speaker 1: China risk before IPO. Wow, So they've got a China

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Speaker 1: risk here, So I guess investors have to get what

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Speaker 1: is that risk?

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Speaker 3: I guess ARM laid out that they generate about a

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Speaker 3: quarter of their revenue from China and that's driven by

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Speaker 3: ARM China, a unit that basically them in soft Bank

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Speaker 3: are partnered with but they don't control. So there's uncertainty

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Speaker 3: around slowing demand in China, which we've been seeing play out.

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Speaker 3: We've seen in the filing that the company's royalties coming

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Speaker 3: from China actually slowed in the last fiscal year.

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Speaker 1: They warned that could continue to slow.

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Speaker 3: And that's all on top of geopolitical risk with the

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Speaker 3: US UK anything going on as it relates to China

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Speaker 3: in Western countries. And you look at some of the

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Speaker 3: reactions we've seen from Bloomberg and two eligence really laying

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Speaker 3: out that China risks paired with slumping smartphone and consumer

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Speaker 3: electronic sales, those are the key concerns for investors going

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Speaker 3: through that's filing that hit yesterday evening.

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Speaker 2: By the way, in terms of the proceeds, this is

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Speaker 2: a sixty to seventy billion dollar valuation right as far

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Speaker 2: as we've reported as far as we've reported, which means

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Speaker 2: what they walk away.

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Speaker 1: With soft Bank.

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Speaker 3: Last week reported soft Bank would walk away with the

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Speaker 3: eight to ten billion dollars because they bought back the

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Speaker 3: remaining twenty five percent from their own vision fund, so

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Speaker 3: they are selling shares into the open market eight to ten.

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Speaker 3: We've been reporting that maybe it's going to be a

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Speaker 3: bit lower because now they own the entirety of the company,

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Speaker 3: So soft Bank actually brings in all of the sales

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Speaker 3: and none of that money is going.

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Speaker 2: To exactly that's the point. So none of these proceeds

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Speaker 2: go get reinvested into arms business. Yep, that's an important point.

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Speaker 3: And it goes back to soft Bank being able to

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Speaker 3: take that cash and redeploy it to some of the

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Speaker 3: other startups that they've tried to back and are looking

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Speaker 3: to back and try to.

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Speaker 1: All Right, here's another thing. I wonder what our reporting

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Speaker 1: is showing, because last quarter day the company had little

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Speaker 1: to know revenue growth dropped about one percent year. Okay,

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Speaker 1: so give you that background. Is there any view coming

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Speaker 1: from the street on valuation?

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Speaker 3: Yet we saw in yours truly reported on this, we

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Speaker 3: saw a burnstea note laying out expectations around forty billion.

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Speaker 3: That was last month when we crunched the numbers looking

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Speaker 3: at some comps they've We've been taught hearing investors in

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Speaker 3: Wall Street talking up Synopsis and Cadence as better comps.

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Speaker 3: When you look at a price of sales trailing on

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Speaker 3: a twelve month average, evaluation comes.

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Speaker 1: Closer to thirty two to forty three billion, So and

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Speaker 1: the company is looking for what sixty to seventy as

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Speaker 1: far as we've and they bought back that bit spread there.

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Speaker 3: My friend, Well, they also bought back with that repurchase

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Speaker 3: from SoftBank, they paid about sixteen billion for that twenty

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Speaker 3: five percent stake, so sixty four billion dollars baked in.

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Speaker 3: But the one thing that was interesting in the filing

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Speaker 3: is SoftBank's warns, and this is verbatim. Investors are cautioned

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Speaker 3: that the purchase price paid may not be indicative of

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Speaker 3: it is not intended to reflect expectations regarding the completed deal.

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Speaker 3: So they basically are warning that they paid sixty evaluation

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Speaker 3: of sixty four billion, forget that that's part of a

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Speaker 3: different deal. Don't worry about ascribing that valuation money, because

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Speaker 3: that's the first place I would go to exactly, and

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Speaker 3: that's what we're talking to investors and people who want.

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Speaker 1: It's not going to be an easy deal, is it.

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Speaker 1: It's going to be a fascinating deal.

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Speaker 3: I mean, we've talked about at length about the dearth

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Speaker 3: of IPOs, and the one view that I've been getting

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Speaker 3: from a number of my sources is that arm is

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Speaker 3: the type of company and they've stuck to their plans

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Speaker 3: to go public this year that could really go public

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Speaker 3: in most any market. It was public once before, back

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Speaker 3: in twenty sixteen. Soft Bank took it private. It's more

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Speaker 3: of an almost pe style play as opposed to your

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Speaker 3: traditional money burning VC.

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Speaker 2: Backed company, and it's the only game in town if

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Speaker 2: you want access to a new issue. If it does well,

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Speaker 2: I guess there'll be a cascade of IPOs that follow.

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Speaker 3: Yes and no. We're expecting potentially Instacart to flip their

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Speaker 3: S one sometime as early as this week. Clay Vio's

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Speaker 3: another company. The big thing that I've been talking to

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Speaker 3: my contacts, their view is fourth quarter twenty twenty three

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Speaker 3: will be interesting with some of these big companies that

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Speaker 3: probably should have or could go at most anytime. But

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Speaker 3: the big focus is going to be early twenty twenty

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Speaker 3: four when you're going to get more of those sweet

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Speaker 3: spot IPOs.

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Speaker 2: Just on a different topic completely. We were talking and

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Speaker 2: have been talking for a long time with Ira Jersey

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Speaker 2: about soccer, and I know messis come here, so it's

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Speaker 2: pretty exciting for a sport that otherwise is just deadly

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Speaker 2: boring to watch. Why doesn't professional lacrosse get a big

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Speaker 2: pick up in this country? And I ask you, Bailey,

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Speaker 2: because I've noticed that you were a lacrosse beat reporter

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Speaker 2: at Citrus TV.

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Speaker 1: Yeah.

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Speaker 3: Man, I cut my teeth at at Syracuse University covering

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Speaker 3: which I still view is probably the best men's lacrosse

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Speaker 3: college team that did not win a national title.

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Speaker 1: They were absolutely stacked. Yeah, And back when we were kids,

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Speaker 1: that was it. It was Em and Jane Johns Hopkins

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Speaker 1: and then now everybody plays its big tens all getting

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Speaker 1: in on it. No.

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Speaker 3: But that's interesting, Matt, because coming from the West Coast,

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Speaker 3: I knew like two.

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Speaker 1: People who played lacrosse.

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Speaker 3: It was a rich kid San Diego sport that being

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Speaker 3: east of LA was like, we play football, that's what

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Speaker 3: men do.

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Speaker 2: And in Ohio, by the way, same thing. Growing up

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Speaker 2: in Ohio lacrosse with something only kids in like New

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Speaker 2: Jersey and Connecticut played. But now at you know the

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Speaker 2: schools that I all the schools I got kicked out

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Speaker 2: of in Central Ohio, they all play lacrosse.

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Speaker 1: Well, it's accelerating. The issue is in the this is

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Speaker 1: the pitch.

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Speaker 3: And I did a small stint covering sports here at

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Speaker 3: Bloomberg and sports business is lacrosse is going to be

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Speaker 3: gaining from parents who maybe don't want their kids to

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Speaker 3: play football for fear of injuries, head injuries. The issue,

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Speaker 3: the one kind of drawing factor is and the reason

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Speaker 3: it's compared to hockey is it's.

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Speaker 2: Not a cheap sport.

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Speaker 3: There aren't a lot of fields to play. So if

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Speaker 3: you don't have a tremendous amount of income where you

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Speaker 3: can find a stick in a ball and find someone

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Speaker 3: to play with, you can't go pick up and play

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Speaker 3: like soccer, football or basketball where there's a court or

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Speaker 3: there's just a grass field.

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Speaker 1: You end the number one high school team in the

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Speaker 1: country this year, the Lawrenceville School. Thank you very much,

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Speaker 1: Thank you Bailly good stuff. Bell Leadership's covers the markets.

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Speaker 4: You're listening to the team. Ken's a live program Bloomberg

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Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot com,

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Speaker 4: the iHeartRadio app, and the Bloomberg Business App, or listen

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Speaker 4: on demand wherever you get your podcasts.

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Speaker 1: Paul Sweeney Live here in our Bloomberg Interactive Broker Studio.

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Speaker 1: We're doing that streaming thing on YouTube, So just head

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Speaker 1: over to YouTube dot com and hip Bloomberg Radio will

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Speaker 1: get you where you need to go to. That'll work on.

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Speaker 2: YouTube dot com and search Bloomberg Radio. There you go.

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Speaker 1: You're into this thing. You know what's going on.

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Speaker 2: Here stream us live.

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Speaker 1: Let's talk about the hotel business, particularly the extended stay

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Speaker 1: part of the business, which is probably a part of

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Speaker 1: the business we don't talk about enough. And Skazafava joins us.

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Speaker 1: She's the general manager and senior vice president of Extended

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Speaker 1: Stay brands at Choice Hotels. Troyti, of course, is a

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Speaker 1: New York Stock Exchange listed company. Ce HH is the

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Speaker 1: ticker to load into your Bloomberg Professional Service and thanks

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Speaker 1: so much for joining us. We appreciate you coming in

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Speaker 1: all the way from Rockville, Maryland. Talk to us about

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Speaker 1: the extended stay business. What are the drivers of your

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Speaker 1: business and what are the trends been I guess over

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Speaker 1: the last several years as the world's kind of reinvented

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Speaker 1: itself a little bit.

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Speaker 5: Yeah, no, that's great. So extended say caters primarily to

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Speaker 5: non discretionaries day so think traveling nurses, construction crews. So

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Speaker 5: we have a lot of tailwinds coming to us with

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Speaker 5: the Infrastructure Bill, the Chips Act, etc. So we see

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Speaker 5: a lot of demand in our future ahead of us

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Speaker 5: at this point in time, I would say the one

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Speaker 5: thing about the extended day brands is that they're pretty resilient.

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Speaker 5: So even in face of recessions and pandemics, we tend

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Speaker 5: to have an occupancy premium over the rest of traditional hotels.

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Speaker 5: So even right now in the first half of the year,

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Speaker 5: economy extended day has a nineteen percent occupancy point percentage

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Speaker 5: over just regular economy transient hotels. So it's a very

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Speaker 5: resilient business model.

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Speaker 2: I guess your biggest competitor right now would be Airbnb.

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Speaker 2: Is that fair to say? I mean, if I was

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Speaker 2: going to go someplace and I had to stay there

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Speaker 2: for two weeks, that would be sorry to say, my

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Speaker 2: first thought.

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Speaker 6: Yeah, I think Airbnb.

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Speaker 5: Though when we look at that their price points are

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Speaker 5: a little bit different, and those guests don't tend to

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Speaker 5: look for kind of the standard guest experience that we

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Speaker 5: provide across that. So the way we think about extended

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Speaker 5: s A is that it's apartment like amenities with a

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Speaker 5: hotel of a flexibility. So you still get the services,

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Speaker 5: the cleaning, it's ed rad that you would expect from

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Speaker 5: a hotel, but you have a full size kitchen in

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Speaker 5: your room, you have some of those larger spaces and

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Speaker 5: suites versus a small traditional hotel room.

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Speaker 1: So are you primarily a franchise company? Okay? So how

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Speaker 1: do you grow your business in terms? Is it simply

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Speaker 1: going after and recruiting franchises? How does that work? How

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Speaker 1: does that growth? Yeah?

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Speaker 5: Absolutely, But I think developers at this point I'm are

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Speaker 5: looking at extends as one of the hottest segments within

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Speaker 5: the lodging industry. And really it's a hedge. It's a

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Speaker 5: really different type of asset class than additional hotel. So

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Speaker 5: over the last couple of years, even even during twenty twenty,

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Speaker 5: Woodspring Suits a our largest brand. They ran gopu margins

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Speaker 5: of fifty percent and they've gone up from there. So

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Speaker 5: last year we were on average at sixty percent, So

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Speaker 5: smart money is really kind of chasing us at this

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Speaker 5: point in time and wanting to get into the segment.

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Speaker 5: We've been able to capitalize on that. We've had over

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Speaker 5: fifty percent more openings in the first half of this

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Speaker 5: year than we did last year. We've grown our pipeline

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Speaker 5: seventeen percent just in the first half of this year.

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Speaker 5: So while we are, yes, of course going after some

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Speaker 5: of the larger developers, they are certainly seeking us out

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Speaker 5: as well.

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Speaker 2: So does the does the change in work from home

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Speaker 2: or the evolution of the way we work have a

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Speaker 2: big effect on your business?

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Speaker 5: Yeah, we've seen a lot of stays now where I mean,

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Speaker 5: I hate the word leisure, but where you get the

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Speaker 5: business traveler right and they're staying for five days and

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Speaker 5: then they tack on.

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Speaker 2: Wait, is that a word if people use, I mean, we.

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Speaker 5: Do in the industry, Yeah, leisure, leisure, businessiness.

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Speaker 2: Sure, leisure. I cannot believe that you're allowed to use

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Speaker 2: that word.

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Speaker 5: Somebody standard industry jargon. For sure, it was, yeah, but

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Speaker 5: that certainly has changed. And then honestly, they're reshoring of

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Speaker 5: a American manufacturing has also been a great tail wind

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Speaker 5: for us at this point in time. So any of

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Speaker 5: those large semiconductor plants that you're starting to see you

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Speaker 5: move in, battery plants, et cetera, are also creating a

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Speaker 5: lot of demand for the extended day segment.

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Speaker 1: How about I mean, can I build a hotel these days?

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Speaker 1: I mean the banks are just pulling back on lending

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Speaker 1: across this across the board. How does that impact I

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Speaker 1: guess you're franchisees.

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Speaker 5: Yeah, so we're the only company that has two entry

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Speaker 5: points into extended day for both the economy segment and

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Speaker 5: the mid scale segment. So what we've done knowing that

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Speaker 5: new constructional lending is a challenge, right, and some of

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Speaker 5: our franchisees can can get that they have community banks,

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Speaker 5: that they've got local relationships, proven track records, and so

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Speaker 5: they're still getting that lending. But a lot of folks

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Speaker 5: where we have markets that have no extended stay to supply,

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Speaker 5: there's a ton of traditional hotels. We came up with

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Speaker 5: a really innovative solution that we call kitchen in a Box.

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Speaker 5: So we worked with engineers, architects, the trades, mechanical, electrical, plumbing,

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Speaker 5: et cetera, and came up with this concept where you

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Speaker 5: can take a traditional hotel room and into an extended

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Speaker 5: stay room, and we have twenty of those transformations going

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Speaker 5: on across the country.

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Speaker 1: What's an extended stay room entail?

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Speaker 5: So you must have a full sized kitchen, full size kitchen,

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Speaker 5: full sized kitchen, okay. And the way that we like

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Speaker 5: to think about it is guests use these rooms for

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Speaker 5: both workplay, me space. Right. They need to be flexible

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Speaker 5: spaces so that it's more kind of like your home,

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Speaker 5: even thoughtful things like you know, you want a larger

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Speaker 5: vanity in the bathroom because you're going to be there

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Speaker 5: for many weeks. You want to be able to put

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Speaker 5: all yourself out right. So that's how we think about

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Speaker 5: designing that with the consumer first and how they're going

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Speaker 5: to use that space.

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Speaker 2: How have labor costs been because I know, you know,

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Speaker 2: in the pandemic, or even at the end of the pandemic,

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Speaker 2: Paul and I would interview hoteliers. How do you say

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Speaker 2: that hoteliers, that's pretty good. Yeah, And they told us,

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Speaker 2: you know, it's very difficult to get people to come

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Speaker 2: to work.

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Speaker 1: Yeah.

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Speaker 5: So the beauty of extended day is in the economy

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Speaker 5: segment in particular, there's only six or seven full time employees.

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Speaker 5: And the reason that is is because we only do

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Speaker 5: housekeeping bi weekly, so the labor model is super light

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Speaker 5: in these hotels, which also enables those high margins that

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Speaker 5: I spoke about earlier. So yes, we are not immune

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Speaker 5: to that, but it certainly lends itself a little bit

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Speaker 5: easier than what you're seeing in traditionally.

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Speaker 2: I see though, so extended stay facilities are not housed

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Speaker 2: within your traditional hotel facilities. They're actually completely separate.

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Speaker 5: Yeah so yeah, So so take a Woodspring Speets for instance. Prototype.

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Speaker 5: Prototype is one hundred and twenty two rooms and they

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Speaker 5: come standard with the kitchens, et cetera. There's also guest laundry,

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Speaker 5: fitness facilities, et cetera, so that you can really maintain

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Speaker 5: your lifestyle there, so you would not see them withinside

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Speaker 5: a traditional hotel.

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Speaker 1: But no, like restaurants or any that type of this

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Speaker 1: is just stays. Okay, Yeah, who do you compete against?

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Speaker 2: Really?

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Speaker 1: Matt mentioned Airbnb, but on the in terms of the

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Speaker 1: traditional extended stay, who's the company?

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Speaker 5: Yeah? Well, I mean we're starting to see a lot

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Speaker 5: of new competitors come into the space. So Marriotte, Hill

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Speaker 5: and High have all really brand launches at this point

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Speaker 5: in time. I think for us though we've been in

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Speaker 5: the space for a really long time. We acquired Woodspring

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Speaker 5: Suites back in twenty eighteen have kind of re invigorated

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Speaker 5: the segment. We have over four hundred open and operating

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Speaker 5: extended stay hotels right now, with another three hundred in

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Speaker 5: the pipeline.

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Speaker 1: And where those are the regional areas that you guys

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Speaker 1: are focusing on, or I mean coast to coast.

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Speaker 5: We certainly see a lot of demand right now in

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Speaker 5: Texas and Florida. The relocation has been big for us

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Speaker 5: as well. So think places like Boise, Idaho that are

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Speaker 5: just growing kind of urban areas at this point in time.

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Speaker 1: Talk to us about rowing.

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Speaker 2: Yeah, she's in the Athletic Hall of Fame. I mean,

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Speaker 2: no joke.

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Speaker 1: What's a Coxswaine? Is that the one that says stroke,

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Speaker 1: stroke or go.

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Speaker 5: It's a little more sophisticated. So you actually have a

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Speaker 5: microphone and there are speakers underneath the seat, right, and

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Speaker 5: so I can whisper and the crew would be able

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Speaker 5: to hear you. But yes, I steered the boat and

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Speaker 5: then you made sure that we were making race moves.

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Speaker 2: What are you should in the front though right in

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Speaker 2: the back so you can see. I see. So you

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Speaker 2: actually do steer literally literally and then you're the motivator

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Speaker 2: of the crew. Correct, absolutely, So what's the athletic Hall

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Speaker 2: of Fame? Like, do you have like your jersey there or.

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Speaker 5: I have met my plaque and it's you know, on

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Speaker 5: the riverfront. So we have our boat house out there.

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Speaker 5: So that's what river is washing it Chester River. So

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Speaker 5: in Maryland.

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Speaker 1: Yeah, I don't know anybody who rose.

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Speaker 2: Uh yeah, I know some.

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Speaker 1: I know some.

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Speaker 2: I actually only know women who row.

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Speaker 5: But it's a big D three so it's huge.

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Speaker 1: Yeah, it's huge.

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Speaker 2: I mean I know a lot of Boston women who

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Speaker 2: row in the Charles.

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Speaker 5: That's amazing. We we we came in third, I want

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Speaker 5: to say one of the years on the Charles. And

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Speaker 5: of course it's a big tradition to throw the Coxon

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Speaker 5: in if you win.

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Speaker 1: All right, good stuff and Skazafava, general manager and Senior

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Speaker 1: VP of Extended Stay Brands at Choice Hotels.

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Speaker 4: You're listening to the tape Cat's are Live program Bloomberg

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Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 4: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: You know, Matt, I don't know about this whole you know,

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Speaker 1: yield curve thing. It's you know, I'm an equities guy,

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Speaker 1: so this is kind of something new for me. But

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Speaker 1: Lisa Bromowitz has been schooling me for years on this

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Speaker 1: and the latest thing she says I have to focus

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Speaker 1: on is real yield for the tenure hit two percent?

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Speaker 1: The highest in a very long time. I think it's

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Speaker 1: two two thousand and nine. What does that mean? I

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Speaker 1: don't know. Somebody ask somebody who's smart about this kind

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Speaker 1: of stuff.

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Speaker 2: And this is what the Fed wanted, right They said

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Speaker 2: they wanted to get real yields positive. At the time

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Speaker 2: that Powell was complaining about it, they were negative, yep.

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Speaker 2: And now they're way up there. So the question is

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Speaker 2: are they then able to achieve their goal of reducing

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Speaker 2: inflation to two percent?

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Speaker 1: And let's ask somebody about that. Jay Haffield, he's the

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Speaker 1: CEO and founder and portfolio manager of Infrastructure Capital Management.

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Speaker 1: It has been kind enough to join us here in

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Speaker 1: our Bloomberg Interactive Broker Studio. So, Jay, talk to us

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Speaker 1: about your call on inflation. I got this real yield

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Speaker 1: thing at two percent. That's the highest since July of

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Speaker 1: two thousand and nine, So that gets my attention. What's

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Speaker 1: going on out there?

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Speaker 7: Thanks Paul Matt for having me on. Well, we actually

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Speaker 7: I think that the Fed is a little bit of

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Speaker 7: out of play right now. So in other words, they

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Speaker 7: may or may not raise one more time. We don't

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Speaker 7: think they will. There was a story in the Journal today,

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Speaker 7: but we did some data in preparation for this. The

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Speaker 7: labor markets really weakening. That sixty percent of jobs added

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Speaker 7: are in the medical sector, and we all know that

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Speaker 7: that's more of a secular increase than cyclical. And also

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Speaker 7: wages are tenuating, So I think that data. We don't

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Speaker 7: think the Fed's going to raise. They don't know that yet,

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Speaker 7: but they're going to get some more data, particularly on

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Speaker 7: the on the labor side, even though that doesn't really matter,

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Speaker 7: but that's what they focus on. And also inflation is

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Speaker 7: going to gradually cool. The measurement of inflation already has cool,

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Speaker 7: but the measurement of inflation will continue to cool. So

441
00:19:49,800 --> 00:19:53,840
Speaker 7: we're optimistic that the FED will not raise again, but

442
00:19:53,920 --> 00:19:57,040
Speaker 7: we're very concerned about the ECB in case you want

443
00:19:57,080 --> 00:19:59,480
Speaker 7: to talk about that, because we think that's critical.

444
00:19:59,000 --> 00:20:01,639
Speaker 2: To Well, let's get to But I do want to

445
00:20:01,680 --> 00:20:03,879
Speaker 2: talk about your view on inflation, because you have your

446
00:20:03,880 --> 00:20:07,840
Speaker 2: own index CPI R and I'm looking at it on

447
00:20:07,920 --> 00:20:12,800
Speaker 2: the infrastructure, on infracap funds dot com on your website.

448
00:20:13,920 --> 00:20:18,400
Speaker 2: How do you see this working out in terms of inflation?

449
00:20:18,560 --> 00:20:20,800
Speaker 2: Is it really going to come back down to two percent?

450
00:20:20,960 --> 00:20:24,520
Speaker 2: And is that going to be anytime soon? Maybe the

451
00:20:24,600 --> 00:20:26,760
Speaker 2: heke one more time, but do we hold at that

452
00:20:26,880 --> 00:20:28,920
Speaker 2: level or are you worried it bounces back?

453
00:20:29,359 --> 00:20:32,199
Speaker 7: Well, the two things to focus on in terms of

454
00:20:32,520 --> 00:20:37,640
Speaker 7: potential bounce back are energy prices and housing prices. So

455
00:20:37,800 --> 00:20:40,119
Speaker 7: energy we do a lot of work on that. We

456
00:20:40,200 --> 00:20:42,920
Speaker 7: think that we're kind of stuck in this seventy five

457
00:20:43,080 --> 00:20:45,760
Speaker 7: ninety five range and also in the fallitude weaken up,

458
00:20:45,760 --> 00:20:47,800
Speaker 7: so we're not worried about energy. And also it's important

459
00:20:47,840 --> 00:20:50,560
Speaker 7: in the US we have natural gas. The trades at

460
00:20:50,560 --> 00:20:53,600
Speaker 7: the equivalent about eighteen dollars a barrel, so it's highly

461
00:20:53,640 --> 00:20:56,720
Speaker 7: deflationary here, not sure the West of the world. Rest

462
00:20:56,760 --> 00:20:58,920
Speaker 7: of the world, natural gas trades roughly be to you,

463
00:20:59,560 --> 00:21:02,040
Speaker 7: why is it same as well? So we're not concerned

464
00:21:02,080 --> 00:21:04,560
Speaker 7: about that. And I think the chances of housing prices

465
00:21:04,600 --> 00:21:07,280
Speaker 7: taking off like a rocket when mortgage rates are seven

466
00:21:07,280 --> 00:21:10,520
Speaker 7: and a half percent is close to zero. So we're

467
00:21:10,600 --> 00:21:14,360
Speaker 7: not concerned about a reacceleration. And then we know that

468
00:21:14,720 --> 00:21:20,240
Speaker 7: the current measurements for CPI and PCE or flawed because

469
00:21:20,280 --> 00:21:23,120
Speaker 7: of their shelter component. And also we don't like pc

470
00:21:23,320 --> 00:21:26,240
Speaker 7: because it has twenty percent medical. But I would say,

471
00:21:26,240 --> 00:21:29,160
Speaker 7: we don't stick this on our website, but we calculate

472
00:21:29,240 --> 00:21:33,320
Speaker 7: pceh R, so that corrects for shelter and that's only

473
00:21:33,320 --> 00:21:34,960
Speaker 7: a two point six percent right now.

474
00:21:35,119 --> 00:21:38,600
Speaker 2: And well CPI R is only one percent year over year,

475
00:21:38,760 --> 00:21:39,359
Speaker 2: right correct.

476
00:21:39,480 --> 00:21:42,879
Speaker 7: Yeah, So we think inflation is already behind that problem

477
00:21:42,920 --> 00:21:46,920
Speaker 7: behind us, and no signs again looking at the forward indicators,

478
00:21:46,920 --> 00:21:51,080
Speaker 7: because we were massively concerned about inflation early twenty one.

479
00:21:51,720 --> 00:21:54,159
Speaker 7: So we think that's behind us. Whether the FED raises

480
00:21:54,200 --> 00:21:56,840
Speaker 7: one more time or not, we don't think it's that critical.

481
00:21:56,880 --> 00:22:00,560
Speaker 7: But we do think the global type monetary power is

482
00:22:00,600 --> 00:22:02,960
Speaker 7: an issue, and I think that's what is driving long

483
00:22:03,040 --> 00:22:04,320
Speaker 7: term rates up right now.

484
00:22:04,359 --> 00:22:08,480
Speaker 2: So all right, let's get then to Europe, what's the

485
00:22:08,480 --> 00:22:10,520
Speaker 2: inflation picture look like to you over there? If it's

486
00:22:10,560 --> 00:22:16,399
Speaker 2: subdued here, but you mentioned we have deflationary natural gas prices,

487
00:22:16,480 --> 00:22:20,040
Speaker 2: and of course they don't. How does inflation look to

488
00:22:20,080 --> 00:22:21,199
Speaker 2: you on the continent?

489
00:22:21,440 --> 00:22:23,719
Speaker 7: Well, I think that that's that is a real problem

490
00:22:23,760 --> 00:22:26,280
Speaker 7: because they've had an enormous increase over the last two years,

491
00:22:26,280 --> 00:22:30,520
Speaker 7: and that's they're less competitive. But our biggest concern is

492
00:22:30,560 --> 00:22:33,879
Speaker 7: that global monetary base. And we will publish this on

493
00:22:33,880 --> 00:22:36,360
Speaker 7: our website as well. Although you can get the data

494
00:22:36,440 --> 00:22:37,800
Speaker 7: you can just if you can add you can get

495
00:22:37,800 --> 00:22:40,080
Speaker 7: it on the terminal as well, but it's still good

496
00:22:40,080 --> 00:22:42,320
Speaker 7: to publish it because even I haven't focused on enough

497
00:22:42,920 --> 00:22:45,679
Speaker 7: dropped by seven hundred billion in the last two months,

498
00:22:46,240 --> 00:22:48,760
Speaker 7: which is an enormous drop. That's now what what dropped

499
00:22:49,520 --> 00:22:54,000
Speaker 7: the global monetary base? Okay, so the global central Bank

500
00:22:54,160 --> 00:22:57,560
Speaker 7: sucked out seven hundred billion dollars of capital.

501
00:22:57,200 --> 00:22:58,920
Speaker 2: And we've seen them two fall here as well.

502
00:22:59,000 --> 00:23:00,800
Speaker 7: Right, yeah, so those are bit more lag But if

503
00:23:00,840 --> 00:23:02,520
Speaker 7: you look at the I would suggest look at the

504
00:23:02,520 --> 00:23:05,800
Speaker 7: monitary base because that's the leading indicator, because it's the

505
00:23:06,000 --> 00:23:09,480
Speaker 7: major component. And I would also say don't ignore this

506
00:23:09,640 --> 00:23:12,400
Speaker 7: so I've made a good call to least our clients.

507
00:23:12,760 --> 00:23:15,440
Speaker 7: When the FED interviewed, I said, okay, that's the sign

508
00:23:15,600 --> 00:23:19,480
Speaker 7: back in pandemic. They're adding, you know, one point two

509
00:23:19,560 --> 00:23:24,000
Speaker 7: trillion of capital to the capital market every year. That's

510
00:23:24,080 --> 00:23:27,919
Speaker 7: just enormous. That's like Warren Buffett, you know, putting is

511
00:23:27,920 --> 00:23:31,520
Speaker 7: one hundred billion to work ten times. So I wouldn't

512
00:23:31,520 --> 00:23:35,320
Speaker 7: ignore the monetary base and those radical changes in particular,

513
00:23:35,560 --> 00:23:37,840
Speaker 7: if they're small, you can ignore them. So we think

514
00:23:37,920 --> 00:23:41,080
Speaker 7: that's the key driver behind this big rise in rates,

515
00:23:41,320 --> 00:23:43,760
Speaker 7: and we did that work because really, frankly, our call

516
00:23:43,840 --> 00:23:46,240
Speaker 7: was that we're going to drop and it was dead wrong.

517
00:23:46,560 --> 00:23:48,440
Speaker 7: So said, well, how can this be? And that's when

518
00:23:48,480 --> 00:23:51,000
Speaker 7: we discovered, because we should have been tracking it as

519
00:23:51,000 --> 00:23:54,560
Speaker 7: well more closely, that the ECB has just done this

520
00:23:54,720 --> 00:23:58,480
Speaker 7: massive QT and that affects all rates in the in

521
00:23:58,520 --> 00:24:02,679
Speaker 7: the world. That it's our bond is eighty five percent

522
00:24:02,680 --> 00:24:05,639
Speaker 7: correlated with all the benchmark bonds. So coming up with

523
00:24:05,680 --> 00:24:09,160
Speaker 7: an explanation just focused on the US is not going

524
00:24:09,200 --> 00:24:11,560
Speaker 7: to be correct when you're talking about the world bond market.

525
00:24:11,880 --> 00:24:15,919
Speaker 1: So what happens to interest rates? When can I refinance

526
00:24:16,000 --> 00:24:17,159
Speaker 1: my mortgage at.

527
00:24:17,000 --> 00:24:22,239
Speaker 2: A lower rate. Well is single minded and focused on

528
00:24:22,359 --> 00:24:25,560
Speaker 2: the high mortgage rate that he got. It's adjustable though,

529
00:24:25,920 --> 00:24:28,320
Speaker 2: because he was figuring at the time, well, next year,

530
00:24:28,320 --> 00:24:30,120
Speaker 2: I'll be able to refinance at the lower rate.

531
00:24:30,840 --> 00:24:33,439
Speaker 7: Yes, so I have adjustable rate mortgages as well. So

532
00:24:33,480 --> 00:24:36,800
Speaker 7: I'm very focused on this. But I don't think that

533
00:24:36,880 --> 00:24:39,400
Speaker 7: we're going to get any relief till probably mid next

534
00:24:39,480 --> 00:24:41,399
Speaker 7: year because of the Fed's about a year behind what

535
00:24:41,440 --> 00:24:43,600
Speaker 7: they should be doing. So you should have cut when

536
00:24:43,600 --> 00:24:48,160
Speaker 7: the banking crisis started. And that is another reason why

537
00:24:48,200 --> 00:24:50,480
Speaker 7: they should pause, and I think that maybe even they'll

538
00:24:50,480 --> 00:24:53,680
Speaker 7: figure this out, is that the banking system is under

539
00:24:53,680 --> 00:24:57,159
Speaker 7: pressure being downgraded. They were downgraded this morning. They should

540
00:24:57,160 --> 00:25:00,439
Speaker 7: be focused on that. So I think we'll get relief

541
00:25:00,560 --> 00:25:03,280
Speaker 7: next year. But the thing to watch, and the reason

542
00:25:03,880 --> 00:25:06,919
Speaker 7: that we're sticking with our bullish call on interest rates,

543
00:25:07,480 --> 00:25:10,720
Speaker 7: is that we do think that the European economy is

544
00:25:10,760 --> 00:25:15,440
Speaker 7: going to crack. They have mostly floating rate mortgages, way

545
00:25:15,480 --> 00:25:17,840
Speaker 7: more than they do in the United States. They have

546
00:25:17,920 --> 00:25:22,479
Speaker 7: this natural gas problem. Germany is levered to China, and

547
00:25:22,560 --> 00:25:27,280
Speaker 7: their ECB is a single mandate central bank, so they're

548
00:25:27,280 --> 00:25:30,440
Speaker 7: going to continue to tighten really probably tell their economies crack,

549
00:25:30,800 --> 00:25:33,240
Speaker 7: So I think that's when rates will come down. Long

550
00:25:33,359 --> 00:25:36,719
Speaker 7: rates will come down when it becomes more obvious that

551
00:25:37,040 --> 00:25:39,720
Speaker 7: Europe has headed into a recession, which is our call

552
00:25:39,800 --> 00:25:42,920
Speaker 7: that they're almost certainly going to probably even substantial.

553
00:25:42,440 --> 00:25:44,440
Speaker 1: Despite all the Americans over their traveling.

554
00:25:45,119 --> 00:25:48,640
Speaker 7: At the margin, that does help. Yeah, the US definitely

555
00:25:48,680 --> 00:25:51,119
Speaker 7: does prop up the rest of the world. But still,

556
00:25:51,560 --> 00:25:54,000
Speaker 7: when you think about all those factors are negative, then

557
00:25:54,200 --> 00:25:55,399
Speaker 7: what is the bowl case for you?

558
00:25:55,880 --> 00:25:58,760
Speaker 1: So how about China? Just because we've been talking a

559
00:25:58,760 --> 00:26:00,960
Speaker 1: lot over the last several weeks report on the weaker

560
00:26:01,000 --> 00:26:04,600
Speaker 1: than expected economic data out of China, how do you

561
00:26:04,680 --> 00:26:05,480
Speaker 1: kind of view all.

562
00:26:05,320 --> 00:26:08,920
Speaker 7: That well when with regard to oil, which is what

563
00:26:09,000 --> 00:26:12,320
Speaker 7: we mostly focus on China about, is that the thing

564
00:26:12,359 --> 00:26:16,359
Speaker 7: to keep in mind is that, of course reporters have

565
00:26:16,400 --> 00:26:19,480
Speaker 7: to write stories. So why is oil down? We talked

566
00:26:19,520 --> 00:26:21,840
Speaker 7: them about this, Well, it's because of China. Well it's

567
00:26:21,960 --> 00:26:25,080
Speaker 7: usually not the case. They have very slow growth in

568
00:26:25,160 --> 00:26:28,320
Speaker 7: oil demand, that's very sticky, so we don't think that

569
00:26:28,320 --> 00:26:32,320
Speaker 7: that demand's going to drop, But we also think that

570
00:26:32,320 --> 00:26:34,639
Speaker 7: that could be positive for long term rates because the

571
00:26:35,480 --> 00:26:37,919
Speaker 7: I'm sorry that the Chinese Central Bank is definitely going

572
00:26:37,920 --> 00:26:41,160
Speaker 7: to cut rates. There's a disappointment when they cut last time,

573
00:26:41,240 --> 00:26:43,640
Speaker 7: but they're going to continue to cut rates. They've really

574
00:26:43,680 --> 00:26:47,400
Speaker 7: hammered their economy through regulation. It's a good example why

575
00:26:47,480 --> 00:26:50,560
Speaker 7: maybe capitalism is superior to communism, and so when you

576
00:26:50,600 --> 00:26:53,239
Speaker 7: do that, it hurts economic growth, and so they're going

577
00:26:53,280 --> 00:26:56,680
Speaker 7: to offset it with monetary policy, and that should also

578
00:26:56,720 --> 00:26:58,760
Speaker 7: be bullish for long term rates.

579
00:26:59,480 --> 00:27:01,440
Speaker 1: And I'm just reading a notes here, real quick, thirty

580
00:27:01,560 --> 00:27:05,359
Speaker 1: seconds fourth quarter for the stock market SMP range of

581
00:27:05,359 --> 00:27:07,080
Speaker 1: forty five hundred to five thousand.

582
00:27:07,480 --> 00:27:10,560
Speaker 7: Correct, although I would say that that's dependent on rates

583
00:27:10,600 --> 00:27:14,600
Speaker 7: at least stop rising, you know, as fast as they

584
00:27:14,640 --> 00:27:16,600
Speaker 7: have been over the last month or so.

585
00:27:17,160 --> 00:27:19,480
Speaker 1: Okay, and anything added Jackson Hole.

586
00:27:20,280 --> 00:27:21,840
Speaker 7: We think it's going to be a non event because

587
00:27:21,880 --> 00:27:23,800
Speaker 7: the Feds already signaled what they want to do. They

588
00:27:23,840 --> 00:27:27,640
Speaker 7: have the dot plot, and we know there's a dubvish camp,

589
00:27:28,080 --> 00:27:30,640
Speaker 7: so that we won't get a repeat of last year

590
00:27:30,680 --> 00:27:34,000
Speaker 7: where Pallet comes out and kind of talks the market

591
00:27:34,000 --> 00:27:34,640
Speaker 7: down right.

592
00:27:34,720 --> 00:27:36,439
Speaker 2: Interesting, all right, Jake, So you don't think there'll be

593
00:27:36,480 --> 00:27:37,320
Speaker 2: a hawkish bent.

594
00:27:37,920 --> 00:27:40,280
Speaker 7: Little bit, but not anything significant like it was.

595
00:27:40,359 --> 00:27:41,919
Speaker 2: Lasting right home about right.

596
00:27:41,960 --> 00:27:43,439
Speaker 1: But let's send the team out there anyway.

597
00:27:43,560 --> 00:27:45,600
Speaker 2: Yeah, two teams, Yeah sure yeah.

598
00:27:45,720 --> 00:27:49,240
Speaker 1: Jay Hatfield, CEO, founder and portfolio manager does it all.

599
00:27:49,760 --> 00:27:52,720
Speaker 1: Infrastructure capital management one of the smarter discussions Matt and

600
00:27:52,760 --> 00:27:55,399
Speaker 1: I have as we try to think about these markets

601
00:27:55,400 --> 00:27:56,240
Speaker 1: and navigate through that.

602
00:27:56,240 --> 00:28:01,000
Speaker 2: And I like his website infracap infracap infracap Funds dot com.

603
00:28:01,040 --> 00:28:02,680
Speaker 1: Boom there you go, go check it out.

604
00:28:03,760 --> 00:28:07,159
Speaker 4: You're listening to the team Ken's are live program Bloomberg

605
00:28:07,200 --> 00:28:10,600
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot Com,

606
00:28:10,640 --> 00:28:13,800
Speaker 4: the iHeartRadio app and the Bloomberg Business app, or listen

607
00:28:13,880 --> 00:28:16,000
Speaker 4: on demand wherever you get your podcasts.

608
00:28:17,760 --> 00:28:19,679
Speaker 1: All right, let's get this banking thing. We got S

609
00:28:19,720 --> 00:28:21,800
Speaker 1: and P coming in better relate than never, I guess,

610
00:28:21,880 --> 00:28:24,760
Speaker 1: kind of saying, hey, there's challenges for the regional banking

611
00:28:25,040 --> 00:28:27,720
Speaker 1: sector and they take down some names. Here, let's break

612
00:28:27,760 --> 00:28:30,880
Speaker 1: it down with our experts. That would be Herman Chant,

613
00:28:31,000 --> 00:28:33,880
Speaker 1: and that would be Arnold. Herman joins us live here

614
00:28:33,880 --> 00:28:38,120
Speaker 1: in our Bloomberg Interactive Broker studio. Arnoldlekuda making use of

615
00:28:38,160 --> 00:28:42,040
Speaker 1: the zoom functionality out there. He joins us as well. Arnold.

616
00:28:42,080 --> 00:28:45,160
Speaker 1: Let's start with you on the credit side. Where do

617
00:28:45,240 --> 00:28:49,440
Speaker 1: you see kind of the pressure that we're seeing across

618
00:28:49,480 --> 00:28:53,000
Speaker 1: the regional bank space in the credit side.

619
00:28:54,240 --> 00:28:57,120
Speaker 8: Yes, I think some of these actions by Moody's and

620
00:28:57,240 --> 00:29:00,240
Speaker 8: SMP I think just gives us a reminder that this

621
00:29:01,160 --> 00:29:02,720
Speaker 8: you know, now, I guess I wouldn't call it a

622
00:29:02,720 --> 00:29:06,360
Speaker 8: crisis anymore, but you know, these issues still exist where

623
00:29:06,360 --> 00:29:09,920
Speaker 8: there is pressure on these banks and their balance sheets. Right,

624
00:29:10,240 --> 00:29:15,240
Speaker 8: funding costs are rising, deposits have fled. Yes, So I

625
00:29:15,240 --> 00:29:18,040
Speaker 8: think a lot of these things that the rating agencies

626
00:29:18,080 --> 00:29:21,840
Speaker 8: are coming out with now are Yeah, it is backward looking,

627
00:29:22,280 --> 00:29:25,520
Speaker 8: but it is a reflection that, you know, all things

628
00:29:25,560 --> 00:29:27,800
Speaker 8: aren't all fine and dandy in regional bank land.

629
00:29:27,920 --> 00:29:29,440
Speaker 1: So if if I wanted to go out I'm a

630
00:29:29,480 --> 00:29:32,479
Speaker 1: regional bank of reasonable credit quality, can I go out

631
00:29:32,480 --> 00:29:35,520
Speaker 1: there and raise capital in your credit markets? And if so, like,

632
00:29:36,120 --> 00:29:37,720
Speaker 1: am I going to really have to pay through the nose?

633
00:29:38,760 --> 00:29:42,840
Speaker 8: Oh? I mean, you know, the the before March regional

634
00:29:42,880 --> 00:29:46,000
Speaker 8: bank debt it was, you know, we're in a totally

635
00:29:46,000 --> 00:29:48,560
Speaker 8: different world. It used to be they trade really tight

636
00:29:48,760 --> 00:29:50,760
Speaker 8: and you couldn't get enough of it right, and it

637
00:29:50,880 --> 00:29:53,600
Speaker 8: trade tight for the credit rating. Now we're in this

638
00:29:53,680 --> 00:29:57,200
Speaker 8: opposite world. Of you know it trades wider. I mean

639
00:29:57,400 --> 00:30:00,120
Speaker 8: things have you gotten better obviously since the heydays of

640
00:30:00,840 --> 00:30:04,520
Speaker 8: March and May, but you know, compared to before, spreads

641
00:30:04,520 --> 00:30:07,560
Speaker 8: are wider, and a lot of these will be hit

642
00:30:07,640 --> 00:30:11,120
Speaker 8: with new debt requirements. So we expect debt issuans to

643
00:30:11,320 --> 00:30:13,040
Speaker 8: pick up for a lot of these. And we have

644
00:30:13,240 --> 00:30:15,440
Speaker 8: seen a couple of regional banks to tap the market.

645
00:30:15,520 --> 00:30:18,880
Speaker 8: We have Charles Schwap today and then we had what

646
00:30:18,960 --> 00:30:21,520
Speaker 8: is it, Huntington and P and C come you know,

647
00:30:21,560 --> 00:30:23,520
Speaker 8: in the in the past week or so. So it

648
00:30:23,600 --> 00:30:26,840
Speaker 8: is available. If the debt does come uh, you know,

649
00:30:26,880 --> 00:30:29,760
Speaker 8: with with some a little bit meat on the bone.

650
00:30:29,840 --> 00:30:31,840
Speaker 8: Let's let's put it that, then there will be demand.

651
00:30:32,680 --> 00:30:35,440
Speaker 2: Herman, what do you think about the uh, you know,

652
00:30:35,520 --> 00:30:38,520
Speaker 2: the banks that were specifically downgraded by S and P.

653
00:30:38,680 --> 00:30:44,240
Speaker 2: You've got Key Corp, Comerica, Valley National, umb and Associated

654
00:30:44,280 --> 00:30:46,120
Speaker 2: Bank Corp R So.

655
00:30:47,360 --> 00:30:51,040
Speaker 9: I would say that the the issues that that the

656
00:30:51,120 --> 00:30:53,840
Speaker 9: rating agencies have highlighted a couple of them, Key Corp

657
00:30:53,920 --> 00:30:57,560
Speaker 9: co America, they're facing some weaker needitors margins than some

658
00:30:57,640 --> 00:31:00,960
Speaker 9: others that in the in our our peer group. That's

659
00:31:01,000 --> 00:31:05,200
Speaker 9: really driven by some higher deposit costs. They actually these

660
00:31:05,200 --> 00:31:09,640
Speaker 9: two banks in particular miss have mishedged their balance sheet

661
00:31:09,680 --> 00:31:12,560
Speaker 9: a bit where they were expecting interest rates to decline

662
00:31:13,600 --> 00:31:16,480
Speaker 9: potentially next year, and it seems like we're in a

663
00:31:16,680 --> 00:31:19,800
Speaker 9: higher for longer environment, so that's actually crimping their margins

664
00:31:19,840 --> 00:31:21,120
Speaker 9: a bit more than some others.

665
00:31:21,520 --> 00:31:25,080
Speaker 2: The is the deposit flight the kind of thing that's

666
00:31:25,080 --> 00:31:30,200
Speaker 2: still ongoing. You know. I was actually at a cocktail party,

667
00:31:30,880 --> 00:31:34,040
Speaker 2: shocking I think like three or four weeks ago, with

668
00:31:35,120 --> 00:31:39,280
Speaker 2: a group of ladies talking about how they got you know,

669
00:31:39,520 --> 00:31:42,160
Speaker 2: high interest rates in this one bank account. And I

670
00:31:42,200 --> 00:31:46,160
Speaker 2: saw one woman, you know, just over the course of

671
00:31:46,160 --> 00:31:49,720
Speaker 2: a conversation at like six pm on a Saturday, say,

672
00:31:49,800 --> 00:31:52,320
Speaker 2: you know what, I'm just gonna move like one hundred

673
00:31:52,360 --> 00:31:54,760
Speaker 2: thousand dollars from my savings account and my bank that

674
00:31:54,800 --> 00:31:58,040
Speaker 2: I've always used into this I can't remember if it

675
00:31:58,120 --> 00:32:02,080
Speaker 2: was the Sacks account or some other, but you know,

676
00:32:02,160 --> 00:32:04,640
Speaker 2: four and a half percent yielding savings account and just

677
00:32:04,720 --> 00:32:05,440
Speaker 2: boom done.

678
00:32:05,600 --> 00:32:05,800
Speaker 7: Right.

679
00:32:06,600 --> 00:32:09,800
Speaker 9: So what we've seen since the fallout in margin April

680
00:32:09,880 --> 00:32:14,600
Speaker 9: is that the deposit actually the deposit bounces have actually

681
00:32:14,720 --> 00:32:19,320
Speaker 9: stabilized across the industry. And how that's happened is they're

682
00:32:19,360 --> 00:32:22,080
Speaker 9: just paying up for those deposits. So you're you're seeing

683
00:32:23,200 --> 00:32:27,920
Speaker 9: high interest savings accounts, high savings accounts approaching five even

684
00:32:27,960 --> 00:32:32,160
Speaker 9: above five percent CDs above five percent for one year term,

685
00:32:32,240 --> 00:32:36,680
Speaker 9: fifteen month term. So that's really the gist of it.

686
00:32:37,400 --> 00:32:39,880
Speaker 9: The banks are paying up and that's really crimping that

687
00:32:39,960 --> 00:32:44,400
Speaker 9: dig's margins and pressuring profitability going forward.

688
00:32:45,760 --> 00:32:48,200
Speaker 1: Arnold, are you seeing any investors come in in your

689
00:32:48,280 --> 00:32:51,600
Speaker 1: market and saying, boy, I see some real value here

690
00:32:51,640 --> 00:32:53,760
Speaker 1: in some of these bonds.

691
00:32:54,600 --> 00:32:58,719
Speaker 8: Well, I mean I think, you know, definitely for you know,

692
00:32:59,160 --> 00:33:02,640
Speaker 8: in a market let's say into until from May to August, right,

693
00:33:03,320 --> 00:33:07,040
Speaker 8: it was a classic risk on uh treasure yields, higher

694
00:33:07,280 --> 00:33:10,640
Speaker 8: spreads tightening and and and the world where everything seemed

695
00:33:10,680 --> 00:33:13,160
Speaker 8: to be pricing to perfection. One of the things that

696
00:33:13,200 --> 00:33:16,760
Speaker 8: are we're still cheap is is kind of the regional banks,

697
00:33:16,960 --> 00:33:20,040
Speaker 8: right and given what they went through. So so yeah,

698
00:33:20,240 --> 00:33:23,120
Speaker 8: I think there is a lot of demand for regionals,

699
00:33:23,480 --> 00:33:25,920
Speaker 8: but I think at the right price, right, And and

700
00:33:26,000 --> 00:33:27,880
Speaker 8: if you look at credit spreads now where they are,

701
00:33:28,120 --> 00:33:30,440
Speaker 8: you know, tighter if you would have woken up today

702
00:33:30,560 --> 00:33:33,320
Speaker 8: versus you know, not knowing what happened from from you know,

703
00:33:33,480 --> 00:33:35,520
Speaker 8: all of this year. You wouldn't even know that there

704
00:33:35,600 --> 00:33:38,160
Speaker 8: was a banking crisis this year, right, given given how

705
00:33:38,200 --> 00:33:41,400
Speaker 8: things have recovered, So you know, I think at the

706
00:33:41,480 --> 00:33:45,920
Speaker 8: right price, they'll be demand. But you know, things have

707
00:33:46,080 --> 00:33:48,120
Speaker 8: you know, we've had a bit of a kind of

708
00:33:48,520 --> 00:33:50,720
Speaker 8: you know, everything sell off in August, right that that's

709
00:33:50,800 --> 00:33:54,800
Speaker 8: coincided with these rating downgrades, rate negative outlook cuts. But

710
00:33:55,400 --> 00:33:57,800
Speaker 8: I think things had been pricing a little bit for perfection.

711
00:33:58,000 --> 00:34:00,560
Speaker 8: But I think if if these new issues Who's come

712
00:34:00,600 --> 00:34:02,920
Speaker 8: to market with a bit of a little bit of

713
00:34:02,920 --> 00:34:05,480
Speaker 8: meat on the bone, then I think you'll see investors

714
00:34:05,480 --> 00:34:06,720
Speaker 8: step up and go through.

715
00:34:07,000 --> 00:34:09,600
Speaker 2: The stocks haven't really recovered, herman. If you look at

716
00:34:09,760 --> 00:34:13,920
Speaker 2: if I look at KRE for example, which is the

717
00:34:16,040 --> 00:34:19,920
Speaker 2: regional s and P spider s and P Regional Banking ETF,

718
00:34:20,440 --> 00:34:23,480
Speaker 2: it's still at the same levels that it hit after

719
00:34:24,760 --> 00:34:27,600
Speaker 2: you know, the big problems that we had, the drop

720
00:34:27,680 --> 00:34:28,600
Speaker 2: that we saw in March.

721
00:34:30,440 --> 00:34:32,799
Speaker 9: The stocks have rebounded a bit from the lows back

722
00:34:32,840 --> 00:34:36,040
Speaker 9: in April and May, but still well below.

723
00:34:37,680 --> 00:34:39,080
Speaker 2: Pre SVB.

724
00:34:40,600 --> 00:34:41,120
Speaker 9: Fallout.

725
00:34:41,239 --> 00:34:44,719
Speaker 2: So I mean the KRE dropped to forty four and

726
00:34:44,760 --> 00:34:48,000
Speaker 2: a half on March thirteenth and right now it's trading

727
00:34:48,080 --> 00:34:50,040
Speaker 2: at forty three sixty.

728
00:34:50,280 --> 00:34:50,520
Speaker 1: Right.

729
00:34:50,760 --> 00:34:54,680
Speaker 9: Valuations are really reflecting the tough environment that Moody's and

730
00:34:54,800 --> 00:35:03,520
Speaker 9: SMP have articulated, So tougher profitability, weaker land. Regulatory requirements

731
00:35:03,520 --> 00:35:05,920
Speaker 9: are going to increase, and we still haven't really seen

732
00:35:06,520 --> 00:35:09,600
Speaker 9: the shoe to drop on the asset quality side, in

733
00:35:09,640 --> 00:35:13,200
Speaker 9: particular office commercial real estate quite yet. So there's going

734
00:35:13,239 --> 00:35:15,000
Speaker 9: to be a lot of headwinds and the banks will

735
00:35:15,080 --> 00:35:20,320
Speaker 9: just need to navigate that and any upside really is

736
00:35:20,840 --> 00:35:24,600
Speaker 9: going to be dependent on where interest rates go and

737
00:35:24,680 --> 00:35:26,080
Speaker 9: potentially cuts down the road.

738
00:35:26,160 --> 00:35:29,640
Speaker 1: So Herman, what do we know about the regulatory changes

739
00:35:29,719 --> 00:35:30,320
Speaker 1: coming along?

740
00:35:31,160 --> 00:35:35,279
Speaker 9: So the regulators in the FED have have put out

741
00:35:35,440 --> 00:35:44,080
Speaker 9: a thousand page documents that outlines some changes to the

742
00:35:44,160 --> 00:35:48,360
Speaker 9: regulatory requirements for particularly the largest banks and the largest

743
00:35:48,360 --> 00:35:51,239
Speaker 9: regional banks of one hundred billion dollars and above. That's

744
00:35:51,320 --> 00:35:55,799
Speaker 9: really focused on tightening how the capital ratios are calculated,

745
00:35:55,880 --> 00:35:59,600
Speaker 9: including unrealized losses in the securities portfolio in the af

746
00:35:59,640 --> 00:36:05,959
Speaker 9: secure portfolio into capital calculations, increasing the debt stack, as

747
00:36:06,160 --> 00:36:09,200
Speaker 9: Arnold mentioned a bit earlier, but there's still going to

748
00:36:09,239 --> 00:36:12,560
Speaker 9: be some other areas that the regulators are focused on.

749
00:36:13,200 --> 00:36:16,840
Speaker 9: I recall during the SBB crisis that uninjured deposits was

750
00:36:16,880 --> 00:36:19,600
Speaker 9: a big thing, So the FDIC is looking at that,

751
00:36:20,160 --> 00:36:22,799
Speaker 9: and then the Fed is also going to come out

752
00:36:22,840 --> 00:36:25,400
Speaker 9: with some regulatory issues on.

753
00:36:25,600 --> 00:36:26,600
Speaker 1: Liquidity as well.

754
00:36:26,680 --> 00:36:28,880
Speaker 9: So there's still more down the road and so the

755
00:36:28,920 --> 00:36:30,680
Speaker 9: banks will just need to have to manage.

756
00:36:30,360 --> 00:36:33,800
Speaker 1: Through it all right, guys, I really appreciate getting the

757
00:36:33,880 --> 00:36:37,440
Speaker 1: update there again, S and P. Following Moody's and doungrading

758
00:36:37,480 --> 00:36:41,480
Speaker 1: some of those regional banks. Really nothing new in kind

759
00:36:41,480 --> 00:36:44,480
Speaker 1: of what they're doing, but simply kind of reflecting kind

760
00:36:44,480 --> 00:36:46,839
Speaker 1: of what I believe the market's known for some time.

761
00:36:46,880 --> 00:36:50,160
Speaker 1: Hermit Chin, Arnold, Cokuda. They cover the regional banks, all

762
00:36:50,160 --> 00:36:54,800
Speaker 1: the banks on the regional side for Bloomberg Intelligence, Arnold

763
00:36:54,800 --> 00:36:57,440
Speaker 1: on the credit side, Herman on the equity side. So

764
00:36:57,440 --> 00:37:00,600
Speaker 1: we got you all covered there on the regional bank space.

765
00:37:00,960 --> 00:37:04,080
Speaker 4: You're listening to the tape Cat's are live program Bloomberg

766
00:37:04,120 --> 00:37:07,719
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the

767
00:37:07,800 --> 00:37:11,000
Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

768
00:37:11,040 --> 00:37:13,879
Speaker 4: You can also listen live on Amazon Alexa from our

769
00:37:13,880 --> 00:37:19,840
Speaker 4: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

770
00:37:20,000 --> 00:37:23,439
Speaker 1: Wet's talk Microsoft. It would like to buy Activision, in fact,

771
00:37:23,480 --> 00:37:25,520
Speaker 1: so much so that it's got a sixty nine billion

772
00:37:25,520 --> 00:37:29,960
Speaker 1: dollar transaction on the table, needs regulatory approval, and the

773
00:37:30,080 --> 00:37:33,840
Speaker 1: UK was really a sticking point. But maybe they're rethinking

774
00:37:33,880 --> 00:37:36,160
Speaker 1: their strategy here. Maybe this steal gets done. So let's

775
00:37:36,200 --> 00:37:38,600
Speaker 1: go to Jen Ree. She's a senior litigation analyst. She's

776
00:37:38,600 --> 00:37:41,319
Speaker 1: covering all the anti trust stuff for Bloomberg Intelligency. Joins

777
00:37:41,360 --> 00:37:44,399
Speaker 1: us here in our Bloomberg Interactive Brokers studio. So, Jen,

778
00:37:44,560 --> 00:37:46,400
Speaker 1: it looks like the UK has taken a little bit

779
00:37:46,400 --> 00:37:49,480
Speaker 1: of an about face and may take a fresh look

780
00:37:49,480 --> 00:37:50,000
Speaker 1: at this deal.

781
00:37:50,480 --> 00:37:52,640
Speaker 6: Yeah, and that looks like what's happening. As a matter

782
00:37:52,680 --> 00:37:54,480
Speaker 6: of fact, they've been looking at it again for about

783
00:37:54,480 --> 00:37:57,160
Speaker 6: a month, and I think Microsoft actually tried to push

784
00:37:57,200 --> 00:38:00,160
Speaker 6: this through on a second look without doing what it's

785
00:38:00,200 --> 00:38:03,239
Speaker 6: done now, which has made some concessions to transfer some

786
00:38:03,280 --> 00:38:06,680
Speaker 6: games to Ubisoft, and that didn't really work. We thought

787
00:38:06,719 --> 00:38:09,160
Speaker 6: maybe there'd be a final report by August twenty ninth

788
00:38:09,200 --> 00:38:11,840
Speaker 6: by the UK. Now it's been pushed to October because

789
00:38:11,880 --> 00:38:13,840
Speaker 6: the deal's been restructured and they have to take a

790
00:38:13,880 --> 00:38:16,560
Speaker 6: look at that the new concession. But it's looking pretty

791
00:38:16,560 --> 00:38:18,920
Speaker 6: good from Microsoft. You know, they've been talking to the UK,

792
00:38:19,160 --> 00:38:22,400
Speaker 6: they know where they are. There's been open communication and

793
00:38:22,440 --> 00:38:24,840
Speaker 6: I really doubt they'd be moving forward with this unless

794
00:38:24,880 --> 00:38:26,440
Speaker 6: they thought that they were going to get clearance at

795
00:38:26,440 --> 00:38:27,239
Speaker 6: the end of this road.

796
00:38:28,160 --> 00:38:30,680
Speaker 1: Look just looking at the stocking Ubisoft, which trades on

797
00:38:30,760 --> 00:38:33,120
Speaker 1: French Exchange up eight and a half percent today.

798
00:38:33,680 --> 00:38:38,239
Speaker 2: So are those concessions going to be what the UK

799
00:38:38,400 --> 00:38:41,840
Speaker 2: wanted to see? Isn't it all about Call of Duty?

800
00:38:41,880 --> 00:38:43,760
Speaker 2: I mean does anything else matter?

801
00:38:44,280 --> 00:38:46,440
Speaker 6: I mean, really this was about Call of Duty, but

802
00:38:46,560 --> 00:38:48,640
Speaker 6: the UK has made it beyond. You know, they don't

803
00:38:48,640 --> 00:38:51,480
Speaker 6: know what's coming out from Activision. These are content creators, right,

804
00:38:51,760 --> 00:38:54,240
Speaker 6: and maybe it'll be the Activision that creates the next

805
00:38:54,239 --> 00:38:56,799
Speaker 6: Call of Duty or you know, the next really popular game.

806
00:38:57,120 --> 00:38:59,520
Speaker 6: So they were really just concerned more about the future

807
00:38:59,719 --> 00:39:01,600
Speaker 6: because they think the future will be more of what

808
00:39:01,840 --> 00:39:04,440
Speaker 6: they call these Triple A games. And also the future

809
00:39:04,480 --> 00:39:07,239
Speaker 6: will be streaming games through the cloud rather than downloading

810
00:39:07,239 --> 00:39:10,680
Speaker 6: them to hardware. So that's what they're trying to protect,

811
00:39:10,800 --> 00:39:14,120
Speaker 6: and that's what they've done by requiring or Microsoft agreeing

812
00:39:14,520 --> 00:39:17,840
Speaker 6: that they will transfer all of the Activision games, including

813
00:39:17,840 --> 00:39:20,279
Speaker 6: Call of Duty for the next fifteen years to Ubisoft,

814
00:39:20,480 --> 00:39:23,160
Speaker 6: so Ubisoft can then license those games to be streamed

815
00:39:23,160 --> 00:39:23,760
Speaker 6: through the cloud.

816
00:39:24,080 --> 00:39:25,400
Speaker 2: Where are we staying in the US?

817
00:39:26,000 --> 00:39:28,360
Speaker 6: Yeah, well, the US, you know, it's been really quiet

818
00:39:28,360 --> 00:39:30,000
Speaker 6: and you don't see much in the news. There's still

819
00:39:30,040 --> 00:39:33,120
Speaker 6: an appeal. The FDC is still fighting this deal in

820
00:39:33,160 --> 00:39:35,720
Speaker 6: the US. They lost in court and then they lost

821
00:39:35,800 --> 00:39:38,640
Speaker 6: their attempt to get an emergency stay. After they lost

822
00:39:38,640 --> 00:39:40,719
Speaker 6: their attempt to lock the deal, they do have an

823
00:39:40,760 --> 00:39:43,360
Speaker 6: appeal pending. The briefing is going to be done in September.

824
00:39:44,400 --> 00:39:46,839
Speaker 6: You could probably have oral argument maybe by the end

825
00:39:46,880 --> 00:39:50,359
Speaker 6: of this year. I mean, if this deal gets uk

826
00:39:50,520 --> 00:39:53,439
Speaker 6: a clearance in October and the deal closes, it means

827
00:39:53,480 --> 00:39:56,480
Speaker 6: the FTC's appeal will be gone going after the deal's

828
00:39:56,480 --> 00:39:58,160
Speaker 6: already consummated and integrated.

829
00:39:58,640 --> 00:40:02,239
Speaker 1: So is that typically happen. There's still going to be

830
00:40:02,280 --> 00:40:03,680
Speaker 1: a review of a deal that's closed.

831
00:40:04,239 --> 00:40:07,279
Speaker 6: It can happen, and the FTC has done that. I'm

832
00:40:07,320 --> 00:40:09,640
Speaker 6: a little surprised by it, you know, after they lost

833
00:40:09,640 --> 00:40:11,520
Speaker 6: in the district court and then lost their effort to

834
00:40:11,520 --> 00:40:14,760
Speaker 6: get an emergency stay. I didn't really think they'd continue

835
00:40:14,800 --> 00:40:18,120
Speaker 6: to pursue this appeal because they lost pretty soundly in court.

836
00:40:18,160 --> 00:40:20,400
Speaker 6: I mean, the judge really said, you just don't really

837
00:40:20,440 --> 00:40:23,160
Speaker 6: have any evidence to prove out your theories of harm

838
00:40:23,200 --> 00:40:26,080
Speaker 6: in this case. And I don't see this. I see

839
00:40:26,080 --> 00:40:28,400
Speaker 6: it as a losing battle and I'm a little bit

840
00:40:28,440 --> 00:40:30,680
Speaker 6: surprised that they're continuing on that road. They may still

841
00:40:30,719 --> 00:40:34,239
Speaker 6: withdraw it after this agreement with the UK that might

842
00:40:34,320 --> 00:40:37,040
Speaker 6: give them the ammunition they need to say, Okay, things

843
00:40:37,080 --> 00:40:37,839
Speaker 6: are different now.

844
00:40:38,000 --> 00:40:40,880
Speaker 1: Is it political so the Biden can go on the

845
00:40:40,920 --> 00:40:43,320
Speaker 1: campaign trail and say I'm tough on business.

846
00:40:43,440 --> 00:40:47,320
Speaker 2: Of course, it's political. It's always political and asking nice.

847
00:40:48,160 --> 00:40:51,440
Speaker 6: Road question, you know, anti trust decisions on mergers are

848
00:40:51,440 --> 00:40:54,000
Speaker 6: not supposed to be political, and really, honestly, in the

849
00:40:54,040 --> 00:40:57,400
Speaker 6: past they mostly were not. I would say now it

850
00:40:57,440 --> 00:41:00,239
Speaker 6: has moved into the political realm for sure. I mean,

851
00:41:00,239 --> 00:41:03,160
Speaker 6: you have a political viewpoint right now that we've allowed

852
00:41:03,160 --> 00:41:05,319
Speaker 6: too much consolidation in the market and we need to

853
00:41:05,320 --> 00:41:07,040
Speaker 6: stop it. We need to slow down M and A

854
00:41:07,040 --> 00:41:09,879
Speaker 6: activity in many industries, and that's why we're seeing these

855
00:41:09,880 --> 00:41:12,520
Speaker 6: aggressive actions by the FTC and DOJ.

856
00:41:12,760 --> 00:41:16,160
Speaker 1: And that is political all right, So what else do

857
00:41:16,200 --> 00:41:17,920
Speaker 1: we have out there? So it looks like this deal's

858
00:41:18,040 --> 00:41:19,879
Speaker 1: moving forward? What else is in your hell?

859
00:41:19,960 --> 00:41:25,680
Speaker 2: Let me just get quickly. So if the FTC and CON,

860
00:41:26,239 --> 00:41:28,560
Speaker 2: I mean clearly they're going to appeal and appeal and appeal,

861
00:41:28,640 --> 00:41:32,200
Speaker 2: but at some point that's over. And if the UK

862
00:41:32,520 --> 00:41:37,200
Speaker 2: approves this, who else has to give it the blessing?

863
00:41:37,239 --> 00:41:39,960
Speaker 2: Their blessing? I mean, is there an EU regulator that

864
00:41:40,000 --> 00:41:42,480
Speaker 2: they need? Is there a Chinese regular that they need?

865
00:41:42,640 --> 00:41:45,680
Speaker 2: Is there, you know, Asian African regulator that they need?

866
00:41:46,000 --> 00:41:48,280
Speaker 2: Does Australia want to block the deal?

867
00:41:48,360 --> 00:41:50,439
Speaker 6: I mean, you know they have everybody else they need.

868
00:41:50,480 --> 00:41:53,440
Speaker 6: And it's really telling because almost all of these jurisdictions,

869
00:41:53,480 --> 00:41:55,359
Speaker 6: and some of which are very serious when it comes

870
00:41:55,400 --> 00:41:59,399
Speaker 6: to antitrust, like Brazil cleared this deal without concessions. Now

871
00:41:59,440 --> 00:42:01,399
Speaker 6: the EU is saying, look, this is a new deal.

872
00:42:01,440 --> 00:42:04,799
Speaker 6: It's been restructured, and we reached a settlement with Microsoft

873
00:42:04,800 --> 00:42:06,960
Speaker 6: and we need to make sure this doesn't impact our settlement,

874
00:42:07,040 --> 00:42:08,839
Speaker 6: so we may have to take another look. I don't

875
00:42:08,880 --> 00:42:10,640
Speaker 6: think that's going to be hindrance to getting the deal

876
00:42:10,680 --> 00:42:13,040
Speaker 6: closed by the deal's end in October.

877
00:42:12,600 --> 00:42:15,960
Speaker 1: Though, And just refresh our memory. The UK gets a

878
00:42:16,000 --> 00:42:19,200
Speaker 1: look at this deal because of Brexit, so they're no

879
00:42:19,239 --> 00:42:22,080
Speaker 1: longer abide by the EU review of the deal, right

880
00:42:22,480 --> 00:42:23,560
Speaker 1: A right.

881
00:42:23,600 --> 00:42:25,719
Speaker 6: That's a thing about the UK used to be part

882
00:42:25,760 --> 00:42:28,200
Speaker 6: of the EU, and it was part of Brussels refew.

883
00:42:28,520 --> 00:42:30,560
Speaker 6: It got you know, glombed in with all the other

884
00:42:30,880 --> 00:42:33,719
Speaker 6: EU countries that were part of that. You know, there

885
00:42:33,760 --> 00:42:36,799
Speaker 6: were thresholds that could be triggered in just the UK previously,

886
00:42:36,880 --> 00:42:41,200
Speaker 6: even before Brexit, but most big deals were assessed by

887
00:42:41,239 --> 00:42:42,520
Speaker 6: the EU and not by UK.

888
00:42:42,600 --> 00:42:45,480
Speaker 1: Oh well, that maybe makes Brexit all worth it to

889
00:42:45,560 --> 00:42:47,839
Speaker 1: get to review deals and destroy the economy.

890
00:42:49,120 --> 00:42:51,399
Speaker 2: By the way, in terms of not political, I'm looking

891
00:42:51,480 --> 00:42:57,560
Speaker 2: at the FTC board here, Lena Kahan. It says she's

892
00:42:57,560 --> 00:43:00,520
Speaker 2: a Democrat, went to ya Law school, by the way.

893
00:43:00,680 --> 00:43:04,439
Speaker 2: Rebecca Slaughter, she's a Democrat. That's right, went to Yale

894
00:43:04,480 --> 00:43:05,279
Speaker 2: Law school, by the way.

895
00:43:05,400 --> 00:43:06,160
Speaker 1: I'm sensing something.

896
00:43:06,200 --> 00:43:10,799
Speaker 2: Alvarro Bedoya, he's a Democrat, a Democrat went to Yale

897
00:43:10,840 --> 00:43:11,280
Speaker 2: law school.

898
00:43:12,719 --> 00:43:13,400
Speaker 1: What's the deal?

899
00:43:13,560 --> 00:43:15,560
Speaker 2: I mean, if it's not political, why do they stack

900
00:43:15,640 --> 00:43:17,600
Speaker 2: the board of Democrats who went to Yale.

901
00:43:17,880 --> 00:43:22,319
Speaker 6: Well, any administration right can appoint commissioners, right, and there

902
00:43:22,320 --> 00:43:25,160
Speaker 6: are five commissioners and no more than three can be

903
00:43:25,200 --> 00:43:27,759
Speaker 6: from one political party. So generally, when we have a

904
00:43:27,800 --> 00:43:31,799
Speaker 6: Democrats are vacant, the other two are vacant. Right now,

905
00:43:31,880 --> 00:43:35,879
Speaker 6: there's some talk of nominees that an appointees coming, right,

906
00:43:36,200 --> 00:43:38,440
Speaker 6: but there's really no pressure on Biden to do that

907
00:43:38,520 --> 00:43:40,640
Speaker 6: and move forward with that. I think he probably will,

908
00:43:40,800 --> 00:43:42,200
Speaker 6: but at the end of the day, it doesn't really

909
00:43:42,239 --> 00:43:44,520
Speaker 6: matter because it requires a majority vote. So when you

910
00:43:44,560 --> 00:43:47,239
Speaker 6: have three Democrats and two Republicans, which will eventually have

911
00:43:47,280 --> 00:43:50,279
Speaker 6: once those two spots are filled, you're still likely going

912
00:43:50,320 --> 00:43:53,120
Speaker 6: to have the majority vote be along the Democratic lines.

913
00:43:53,120 --> 00:43:56,000
Speaker 6: And these three have pretty much aligned on almost everything

914
00:43:56,040 --> 00:43:56,399
Speaker 6: so far.

915
00:43:56,600 --> 00:43:59,440
Speaker 1: And in my world of median telecommunications, it's the Federal

916
00:43:59,440 --> 00:44:03,040
Speaker 1: Communication Commission, and it's exact same same situation. You know,

917
00:44:03,000 --> 00:44:06,960
Speaker 1: whoever's in power gets the gets the role there. And

918
00:44:07,040 --> 00:44:10,440
Speaker 1: Yale is Yale the best law schools most rankings.

919
00:44:10,120 --> 00:44:11,160
Speaker 2: Certainly, I don't know.

920
00:44:11,200 --> 00:44:13,960
Speaker 6: Apparently they like the anti trust regulators.

921
00:44:13,880 --> 00:44:16,000
Speaker 1: On the rankings, isn't it. I guess it's I.

922
00:44:15,920 --> 00:44:18,120
Speaker 6: Think it's up there. I don't know, yeah, but I

923
00:44:18,320 --> 00:44:20,560
Speaker 6: think I think it's up there. I'm look, it's Yale yeah,

924
00:44:20,640 --> 00:44:21,840
Speaker 6: of course it's great.

925
00:44:21,680 --> 00:44:25,920
Speaker 1: Exactly all right. So what else on antitrust front are

926
00:44:25,920 --> 00:44:27,320
Speaker 1: you looking at here? What are some of the big

927
00:44:27,640 --> 00:44:29,520
Speaker 1: trades out there that are still need some approval?

928
00:44:29,640 --> 00:44:32,280
Speaker 6: You know, we're looking at Adobe Figma now that obviously

929
00:44:32,360 --> 00:44:34,719
Speaker 6: one of the one is a private company, but that's

930
00:44:34,719 --> 00:44:37,399
Speaker 6: been sort of lagging. I suspect the dj is likely

931
00:44:37,440 --> 00:44:40,080
Speaker 6: to challenge that deal. You know, we're waiting for Kroger

932
00:44:40,080 --> 00:44:43,520
Speaker 6: and Albertson's. That's before the FTC. I wouldn't be surprised

933
00:44:43,520 --> 00:44:45,399
Speaker 6: at all if the FDC went to court to try

934
00:44:45,400 --> 00:44:47,640
Speaker 6: to block that deal as well, and trial will start

935
00:44:47,640 --> 00:44:51,680
Speaker 6: in October. In the Jet Blue Spirit deal, who cares?

936
00:44:53,040 --> 00:44:54,840
Speaker 2: Do we care?

937
00:44:54,840 --> 00:44:57,560
Speaker 1: In the markets that are don't get a lot of

938
00:44:57,640 --> 00:45:01,480
Speaker 1: service and you care about I want both jet Blue

939
00:45:01,520 --> 00:45:03,239
Speaker 1: and Spirit to serve my right.

940
00:45:03,560 --> 00:45:05,879
Speaker 6: I mean they have two very different models, right. Jet

941
00:45:05,960 --> 00:45:09,080
Speaker 6: Blue is considered a low cost carrier, whereas Spirit's ultra

942
00:45:09,120 --> 00:45:11,759
Speaker 6: low cost, which really means everything's all a part. Right,

943
00:45:12,040 --> 00:45:15,080
Speaker 6: you can get the absolute cheapest fair without any other perks,

944
00:45:15,120 --> 00:45:17,279
Speaker 6: no food, no luggage, nothing else, and you can't pick

945
00:45:17,280 --> 00:45:21,080
Speaker 6: your seat. There is a set of consumers that prefers

946
00:45:21,120 --> 00:45:23,520
Speaker 6: to have that option right for when they travel. And

947
00:45:23,600 --> 00:45:25,960
Speaker 6: what will happen is that this deal, at least the

948
00:45:26,000 --> 00:45:28,840
Speaker 6: allegation is, will take that option out of many markets,

949
00:45:29,280 --> 00:45:32,280
Speaker 6: or reduce the option from two which we're Frontier and Spirit,

950
00:45:32,360 --> 00:45:34,640
Speaker 6: down to just one, which would be Frontier when Jet

951
00:45:34,640 --> 00:45:35,399
Speaker 6: Blue takes over.

952
00:45:35,760 --> 00:45:39,319
Speaker 2: On the other hand, it's hard for Jet Blue and

953
00:45:39,640 --> 00:45:45,040
Speaker 2: also for Spirit and a Frontier to compete with the

954
00:45:45,480 --> 00:45:50,640
Speaker 2: duopoly that we essentially have here. Right, You've got Delta, United,

955
00:45:50,800 --> 00:45:55,680
Speaker 2: American American who hog all the slots, you know.

956
00:45:55,719 --> 00:45:58,080
Speaker 6: And that's what Jet Blue says, right, And that's their argument,

957
00:45:58,160 --> 00:46:00,560
Speaker 6: And that's been an argument an airline merger with some

958
00:46:00,600 --> 00:46:02,680
Speaker 6: of the low cost carriers and the ultra low cost

959
00:46:02,760 --> 00:46:05,840
Speaker 6: carriers in the past. I will say that in twenty

960
00:46:05,920 --> 00:46:08,440
Speaker 6: years that I've been watching this, the argument that we

961
00:46:08,520 --> 00:46:10,759
Speaker 6: need to merge in order to better compete with the

962
00:46:10,760 --> 00:46:14,040
Speaker 6: top guys never seems to work. It just doesn't really

963
00:46:14,080 --> 00:46:16,160
Speaker 6: work because if you take that merger on its own,

964
00:46:16,160 --> 00:46:19,280
Speaker 6: and it's anti competitive and might have a price increasing

965
00:46:19,360 --> 00:46:22,920
Speaker 6: effect or an output reducing effect, it doesn't really matter

966
00:46:22,960 --> 00:46:25,200
Speaker 6: that much. It can't be outweighed by that argument.

967
00:46:25,480 --> 00:46:27,520
Speaker 1: I'm looking at the Spirit map. I mean they fly

968
00:46:28,080 --> 00:46:31,600
Speaker 1: pretty much everywhere, I mean, including the Caribbean and Central

969
00:46:31,640 --> 00:46:34,120
Speaker 1: American stuff like that. So it's a much bigger, more

970
00:46:34,120 --> 00:46:35,440
Speaker 1: denser map than I thought.

971
00:46:35,520 --> 00:46:40,480
Speaker 2: So, but only in this essentially, you know, only in

972
00:46:40,600 --> 00:46:41,360
Speaker 2: sort of North.

973
00:46:41,120 --> 00:46:43,840
Speaker 1: America, yeah, right, North and Central America. Yeah, so not

974
00:46:44,400 --> 00:46:45,799
Speaker 1: any international stuff other than.

975
00:46:45,760 --> 00:46:47,680
Speaker 2: And jef Leu has now branched out, so now they

976
00:46:47,680 --> 00:46:50,560
Speaker 2: go to London, they go to Amsterdam, and they go

977
00:46:50,600 --> 00:46:51,080
Speaker 2: to Paris.

978
00:46:51,760 --> 00:46:53,520
Speaker 6: Yeah, but that was hindered a little bit because the

979
00:46:53,560 --> 00:46:57,120
Speaker 6: Department of Justice challenged their northeast alliance with American right,

980
00:46:57,120 --> 00:46:58,359
Speaker 6: which kind of hindered some of that.

981
00:46:58,440 --> 00:47:00,120
Speaker 1: All right, Jen, thanks so much, We appreciate it. And

982
00:47:00,200 --> 00:47:02,320
Speaker 1: re senior litigation analyst Bloomberg Intelligence.

983
00:47:02,680 --> 00:47:05,799
Speaker 4: You're listening to the tape Cat's are live program Bloomberg

984
00:47:05,840 --> 00:47:09,440
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the

985
00:47:09,480 --> 00:47:12,719
Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

986
00:47:12,760 --> 00:47:15,560
Speaker 4: You can also listen live on Amazon Alexa from our

987
00:47:15,600 --> 00:47:20,759
Speaker 4: flagship New York station just Say Alexa playing Bloomberg eleven thirty.

988
00:47:21,320 --> 00:47:24,040
Speaker 1: One of the areas of the market that we've been

989
00:47:24,120 --> 00:47:26,680
Speaker 1: talking a lot about over the last several years, increasingly

990
00:47:26,719 --> 00:47:29,040
Speaker 1: so is the private credit market. We all know about

991
00:47:29,040 --> 00:47:32,480
Speaker 1: the private equity business, but the private credit business has

992
00:47:32,520 --> 00:47:35,880
Speaker 1: been a been getting a lot of capital flows and

993
00:47:35,920 --> 00:47:37,879
Speaker 1: has been very active. I wanted to get a little

994
00:47:37,880 --> 00:47:40,120
Speaker 1: bit more details on that market. Jackie Ward joins us.

995
00:47:40,160 --> 00:47:44,840
Speaker 1: She's a director of private Investments for umb Bank Family Wealth.

996
00:47:45,360 --> 00:47:48,160
Speaker 1: She joins us via zoom. Jackie talk to us about

997
00:47:48,239 --> 00:47:51,920
Speaker 1: how you guys at umb you know, address and deal

998
00:47:52,120 --> 00:47:55,080
Speaker 1: and play in the private credit business.

999
00:47:56,040 --> 00:47:58,719
Speaker 10: Absolutely, thanks for having me here at you and b

1000
00:47:58,840 --> 00:48:00,600
Speaker 10: There's a number of different ways we kind of play

1001
00:48:00,640 --> 00:48:03,560
Speaker 10: in the private credit business. In my world, we have

1002
00:48:03,640 --> 00:48:06,160
Speaker 10: a couple of bank owned funds that invest in private credit,

1003
00:48:06,440 --> 00:48:09,800
Speaker 10: so we're regularly looking at opportunities in the private credit space,

1004
00:48:09,960 --> 00:48:13,640
Speaker 10: mezzanine debt, junior lean debt, and working with companies that way.

1005
00:48:14,160 --> 00:48:16,680
Speaker 10: From umb Bank standpoint as a senior lender, we also

1006
00:48:16,760 --> 00:48:19,120
Speaker 10: often work with junior capital providers to fill out the

1007
00:48:19,120 --> 00:48:21,760
Speaker 10: rest of the capital stack, so we get to interact

1008
00:48:21,800 --> 00:48:24,360
Speaker 10: with private credit, whether it's from a senior position or

1009
00:48:24,440 --> 00:48:27,160
Speaker 10: actually doing investment in private credit ourselves.

1010
00:48:27,640 --> 00:48:32,080
Speaker 1: So my understanding is the private credit business really kind

1011
00:48:32,080 --> 00:48:35,160
Speaker 1: of took hold in terms of growing after the Great

1012
00:48:35,200 --> 00:48:38,520
Speaker 1: Financial crisis, when a lot of the banks, from a

1013
00:48:38,560 --> 00:48:40,920
Speaker 1: regulatory standpoint had to pull back a little bit from

1014
00:48:40,960 --> 00:48:43,480
Speaker 1: certain types of loans and in terms of what they

1015
00:48:43,520 --> 00:48:46,000
Speaker 1: could own on their balance sheet. Is that still the

1016
00:48:46,040 --> 00:48:49,280
Speaker 1: primary driver of what's driving the growth of this business.

1017
00:48:50,560 --> 00:48:52,040
Speaker 10: I think it's a little bit of both. I think

1018
00:48:52,080 --> 00:48:54,799
Speaker 10: two thousand and eight put private credit on the map

1019
00:48:54,840 --> 00:48:56,719
Speaker 10: because the question in two thousand and eight was when

1020
00:48:56,760 --> 00:48:59,640
Speaker 10: our big bank's going to come back into lending, and

1021
00:48:59,680 --> 00:49:01,439
Speaker 10: I think the answer was it might take some time,

1022
00:49:01,480 --> 00:49:03,880
Speaker 10: and so you saw the launch of private credit. But

1023
00:49:03,960 --> 00:49:06,319
Speaker 10: these days, I think private credit is growing a lot

1024
00:49:06,440 --> 00:49:10,400
Speaker 10: just around direct lending efforts. Also, as banks kind of

1025
00:49:10,440 --> 00:49:13,319
Speaker 10: tightened in general, you're seeing less senior stretched at you're

1026
00:49:13,360 --> 00:49:16,040
Speaker 10: seeing more debt fall into the private credit space, and

1027
00:49:16,040 --> 00:49:19,400
Speaker 10: you're also seeing unitraanch financing become a huge spot in

1028
00:49:19,440 --> 00:49:22,719
Speaker 10: the market. So with syndications down in general, a lot

1029
00:49:22,719 --> 00:49:25,879
Speaker 10: of companies are looking for a single provider that can

1030
00:49:25,920 --> 00:49:29,360
Speaker 10: provide a senior junior credit type blend through one instrument

1031
00:49:29,440 --> 00:49:32,200
Speaker 10: versus working with two different providers, and that's driving a

1032
00:49:32,200 --> 00:49:33,040
Speaker 10: lot of growth as well.

1033
00:49:33,320 --> 00:49:36,279
Speaker 1: You know, Jamie Dimond, I think probably talking his own book,

1034
00:49:36,320 --> 00:49:38,640
Speaker 1: but you know, He kind of says, hey, this private

1035
00:49:38,640 --> 00:49:41,600
Speaker 1: credit market's not regulated. Do we really know what's going

1036
00:49:41,640 --> 00:49:43,520
Speaker 1: on out there? How do you respond to that?

1037
00:49:45,560 --> 00:49:48,520
Speaker 10: You know, private credit, these are funds. They're regulated as funds,

1038
00:49:48,560 --> 00:49:51,279
Speaker 10: and asset managers are not regulated by bank regulators. I

1039
00:49:51,320 --> 00:49:54,520
Speaker 10: think there's a few different ways to look at that. One,

1040
00:49:54,560 --> 00:49:56,719
Speaker 10: they're not regulated by bank regulators because they have a

1041
00:49:56,760 --> 00:49:59,720
Speaker 10: different source of funds. So private credit funds are also

1042
00:50:00,120 --> 00:50:02,600
Speaker 10: or raising money directly to invest in private credit, it's

1043
00:50:02,600 --> 00:50:05,640
Speaker 10: opposed to using deposit or money. And because of that

1044
00:50:05,680 --> 00:50:07,440
Speaker 10: they have they're able to take a little bit different

1045
00:50:07,719 --> 00:50:10,359
Speaker 10: outlook and potentially a longer point of view. I do

1046
00:50:10,440 --> 00:50:12,879
Speaker 10: think with any private and investment, you know, the lack

1047
00:50:12,920 --> 00:50:14,879
Speaker 10: of regulation makes it really important to know who you're

1048
00:50:14,920 --> 00:50:17,640
Speaker 10: working with. You know, private credit funds that have long

1049
00:50:17,719 --> 00:50:20,080
Speaker 10: histories or attached institutions like you and b that have

1050
00:50:20,160 --> 00:50:22,759
Speaker 10: long histories tend to do well because of course we're

1051
00:50:22,840 --> 00:50:25,560
Speaker 10: we're working with a broader market. I think it just

1052
00:50:25,600 --> 00:50:27,880
Speaker 10: goes back to diligence and knowing who you're working with

1053
00:50:27,920 --> 00:50:29,440
Speaker 10: and who you're investing your dollars with.

1054
00:50:30,040 --> 00:50:33,960
Speaker 1: What types of deals are you guys seeing these days?

1055
00:50:35,400 --> 00:50:36,960
Speaker 10: You know, in our group, we're seeing a lot of

1056
00:50:37,000 --> 00:50:41,080
Speaker 10: deals in the manufacturing distribution space, especially in distribution where

1057
00:50:41,080 --> 00:50:43,279
Speaker 10: you might be dealing with an asset like company that

1058
00:50:43,320 --> 00:50:45,319
Speaker 10: still has a lot of working capital, needs a lot

1059
00:50:45,320 --> 00:50:48,160
Speaker 10: of growth. We're also seeing a lot of Bolton deals,

1060
00:50:48,239 --> 00:50:51,440
Speaker 10: so in our portfolio, the vast majority of our companies

1061
00:50:51,480 --> 00:50:54,399
Speaker 10: or platform companies, so we're actively looking for new opportunities

1062
00:50:54,440 --> 00:50:56,920
Speaker 10: and looking for M and A opportunities and it's a

1063
00:50:56,960 --> 00:50:58,799
Speaker 10: great way for us to put in more junior debt.

1064
00:50:58,920 --> 00:51:01,560
Speaker 10: So with the credit kind of tightening, some of that

1065
00:51:01,640 --> 00:51:04,080
Speaker 10: senior stretched at falling into our space is creating a

1066
00:51:04,120 --> 00:51:06,080
Speaker 10: lot of opportunity in both of those industries.

1067
00:51:06,640 --> 00:51:09,319
Speaker 1: And do most of the deals that come across your

1068
00:51:09,440 --> 00:51:12,800
Speaker 1: desk are they from Are they private equity sponsored deals? Primarily?

1069
00:51:13,680 --> 00:51:16,399
Speaker 10: Yeah, we work primarily with private equity sponsors as well

1070
00:51:16,440 --> 00:51:19,640
Speaker 10: as you know LBO type funds. We're often working with

1071
00:51:19,719 --> 00:51:22,319
Speaker 10: them or independent sponsors where they're taking down the entire

1072
00:51:22,360 --> 00:51:25,720
Speaker 10: opportunity and they're looking for partners in the capital stack.

1073
00:51:26,480 --> 00:51:29,359
Speaker 1: Interesting, So what is deal flow like these days? Because

1074
00:51:29,360 --> 00:51:31,560
Speaker 1: we've heard from you know, some of the larger publicly

1075
00:51:31,600 --> 00:51:35,960
Speaker 1: traded investment banks that not a lot getting done per se,

1076
00:51:36,040 --> 00:51:38,200
Speaker 1: What are you seeing in your market?

1077
00:51:39,320 --> 00:51:40,200
Speaker 2: You know, we were.

1078
00:51:40,120 --> 00:51:42,000
Speaker 10: Kind of in the lower middle market and we're actually

1079
00:51:42,000 --> 00:51:44,520
Speaker 10: seeing a lot of opportunity and most of the deals

1080
00:51:44,520 --> 00:51:47,000
Speaker 10: that we're investing in, you know, we're looking at enterprise

1081
00:51:47,120 --> 00:51:49,920
Speaker 10: values of one hundred million or under and activity in

1082
00:51:49,920 --> 00:51:52,120
Speaker 10: that space. You still have a lot of companies owned

1083
00:51:52,160 --> 00:51:54,839
Speaker 10: by generations that are looking to make exits. You still

1084
00:51:54,880 --> 00:51:57,000
Speaker 10: have a lot of companies that are seeing an opportunity

1085
00:51:57,040 --> 00:51:59,319
Speaker 10: for M and A. So we're still seeing a good

1086
00:51:59,400 --> 00:52:01,200
Speaker 10: number of deals in our space. I think as you

1087
00:52:01,280 --> 00:52:04,040
Speaker 10: move up market, the markets get a little bit tighter

1088
00:52:04,080 --> 00:52:06,680
Speaker 10: and a little bit harder to raise debt. So we're

1089
00:52:06,760 --> 00:52:08,279
Speaker 10: very happy to be in the space we're in.

1090
00:52:08,760 --> 00:52:10,640
Speaker 1: And you guys are you and b you're based in

1091
00:52:10,760 --> 00:52:14,040
Speaker 1: Kansas City, right, yeah? And so do you do I mean,

1092
00:52:14,280 --> 00:52:17,239
Speaker 1: do you try to lend your regional expertise to the

1093
00:52:17,239 --> 00:52:20,000
Speaker 1: private equity sponsors out there? The companies out there is

1094
00:52:20,000 --> 00:52:22,239
Speaker 1: that's kind of where you guys, you know, kind of

1095
00:52:22,280 --> 00:52:22,840
Speaker 1: do your knitting.

1096
00:52:24,120 --> 00:52:25,640
Speaker 10: So you know, we get to work with the private

1097
00:52:25,680 --> 00:52:27,799
Speaker 10: equity groups in a lot of different ways. We have

1098
00:52:27,880 --> 00:52:29,680
Speaker 10: ways on the commercial bank side that we work with

1099
00:52:29,680 --> 00:52:32,799
Speaker 10: our private equity groups. Our bank is largely located, you know,

1100
00:52:32,880 --> 00:52:36,080
Speaker 10: Midwest focus groups like mine, We operate coast to coast,

1101
00:52:36,120 --> 00:52:39,080
Speaker 10: working with different private equity sponsors on direct and investment

1102
00:52:39,160 --> 00:52:43,120
Speaker 10: in their deals, either using mezzanine or minority equity. But

1103
00:52:43,200 --> 00:52:45,120
Speaker 10: we often you know, U and B Bank is one

1104
00:52:45,160 --> 00:52:47,960
Speaker 10: large family, so we're often working with all the different divisions,

1105
00:52:48,360 --> 00:52:50,120
Speaker 10: you know, in concert to make sure that we're looking

1106
00:52:50,120 --> 00:52:50,640
Speaker 10: at the deal.

1107
00:52:50,520 --> 00:52:51,000
Speaker 4: The right way.

1108
00:52:51,800 --> 00:52:54,880
Speaker 1: Interesting. So here, we've got a big, big increase in

1109
00:52:54,880 --> 00:52:57,239
Speaker 1: the interest rates over the past twelve to eighteen months.

1110
00:52:57,280 --> 00:53:00,600
Speaker 1: How's that impacted your business maybe, what kind of deals

1111
00:53:00,640 --> 00:53:02,520
Speaker 1: you see, what kind of structures you put in place.

1112
00:53:04,239 --> 00:53:07,280
Speaker 10: You know, in our world, a lot of our deals,

1113
00:53:07,280 --> 00:53:09,680
Speaker 10: you know, slightly higher interest rate interest only. We still

1114
00:53:09,719 --> 00:53:11,920
Speaker 10: have a lot of room and flexibility on that spread.

1115
00:53:12,320 --> 00:53:14,080
Speaker 10: I know one thing that we're watching just in the

1116
00:53:14,120 --> 00:53:16,439
Speaker 10: market in general is private credit is doing really well

1117
00:53:16,520 --> 00:53:19,880
Speaker 10: right now. I think there are a lot of funds

1118
00:53:19,880 --> 00:53:22,160
Speaker 10: that might have put out notes twelve to eighteen months

1119
00:53:22,200 --> 00:53:24,799
Speaker 10: ago in a different brain environment. So we're keeping a

1120
00:53:24,840 --> 00:53:27,120
Speaker 10: really close eye on defaults coming into the back end

1121
00:53:27,120 --> 00:53:28,799
Speaker 10: of this year and early next year to make sure

1122
00:53:28,840 --> 00:53:31,120
Speaker 10: that doesn't have an impact on them, but kind of

1123
00:53:31,160 --> 00:53:33,200
Speaker 10: going back to the source of funding for a lot

1124
00:53:33,239 --> 00:53:36,920
Speaker 10: of private credit because we're not utilizing deposit dollars in

1125
00:53:36,920 --> 00:53:39,160
Speaker 10: that sense, we have a different kind of cost structure

1126
00:53:39,160 --> 00:53:41,200
Speaker 10: that we get to compare against, and that gives us

1127
00:53:41,239 --> 00:53:42,520
Speaker 10: a little bit more flexibility.

1128
00:53:43,000 --> 00:53:45,600
Speaker 1: And so for your funds, who's a typical investor.

1129
00:53:47,160 --> 00:53:49,440
Speaker 10: For our funds? So on our family wealth side, we

1130
00:53:49,520 --> 00:53:52,319
Speaker 10: do have a number of single asset holdings that tend

1131
00:53:52,360 --> 00:53:55,919
Speaker 10: to be institutional and high net worth. The primary fund

1132
00:53:55,960 --> 00:53:58,280
Speaker 10: we invest private credit out of is a bank owned fund,

1133
00:53:58,719 --> 00:54:01,120
Speaker 10: and so a number of years ago that bank seated

1134
00:54:01,200 --> 00:54:03,480
Speaker 10: us with cash and we've been recycling that capital since.

1135
00:54:03,680 --> 00:54:03,799
Speaker 5: Hi.

1136
00:54:03,880 --> 00:54:07,279
Speaker 1: Fascinating stuff. Always love talking about the private credit business again,

1137
00:54:07,320 --> 00:54:10,560
Speaker 1: a fast, fast growing business within financial services, seen to

1138
00:54:10,560 --> 00:54:12,719
Speaker 1: spring out of nowhere after the Great Financial Crisis and

1139
00:54:12,760 --> 00:54:16,120
Speaker 1: now it's a major major player. Jackie Ward, she's the

1140
00:54:16,160 --> 00:54:19,920
Speaker 1: director of private Investments at mb Bank Family Wealth.

1141
00:54:21,480 --> 00:54:24,560
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1142
00:54:24,600 --> 00:54:28,400
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1143
00:54:28,480 --> 00:54:32,200
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1144
00:54:32,400 --> 00:54:34,880
Speaker 2: at Matt Miller nineteen seventy three.

1145
00:54:34,760 --> 00:54:37,160
Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.

1146
00:54:37,280 --> 00:54:39,920
Speaker 1: Before the podcast, you can always catch us worldwide at

1147
00:54:39,960 --> 00:54:41,720
Speaker 1: Bloomberg Radio