1 00:00:00,120 --> 00:00:04,360 Speaker 1: Bloomberg is now on your dashboard with Apple CarPlay and 2 00:00:04,360 --> 00:00:08,160 Speaker 1: Android Auto. It gives you access to every Bloomberg podcast, 3 00:00:08,280 --> 00:00:11,560 Speaker 1: live audio feeds from Bloomberg Radio, print stories from Bloomberg 4 00:00:11,640 --> 00:00:14,920 Speaker 1: News in audio form, and the latest headlines of the 5 00:00:14,920 --> 00:00:18,600 Speaker 1: click of a button with Bloomberg News. Now it's free 6 00:00:18,680 --> 00:00:21,439 Speaker 1: with the latest version of the Bloomberg Business App. That's 7 00:00:21,680 --> 00:00:24,400 Speaker 1: the Bloomberg Business App. Get it on your phone in 8 00:00:24,440 --> 00:00:27,760 Speaker 1: the Apple App Store or on Google Play. Just download 9 00:00:27,800 --> 00:00:30,560 Speaker 1: the app, connect your phone to your car and get started. 10 00:00:30,960 --> 00:00:34,400 Speaker 1: And it's all presented by our sponsor, Interactive Brokers. 11 00:00:35,400 --> 00:00:38,600 Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 12 00:00:38,640 --> 00:00:39,800 Speaker 2: my co host Matt Miller. 13 00:00:40,200 --> 00:00:44,159 Speaker 1: Every business day we bring you interviews from CEOs, market pros, 14 00:00:44,320 --> 00:00:48,160 Speaker 1: and Bloomberg experts, along with essential market moven News. 15 00:00:48,720 --> 00:00:51,839 Speaker 2: Find the Bloomberg Markets podcast called Apple Podcasts or wherever 16 00:00:51,960 --> 00:00:54,560 Speaker 2: you listen to podcasts, and at Bloomberg dot Com slash 17 00:00:54,600 --> 00:00:59,320 Speaker 2: podcast we talk about serial entrepreneurs. I gotta throw our 18 00:00:59,320 --> 00:01:01,880 Speaker 2: next guest into this category. Brad Jacobs. He's the executive 19 00:01:01,920 --> 00:01:05,960 Speaker 2: chairman of XPO. You know that logistics company. XPO is 20 00:01:06,000 --> 00:01:08,440 Speaker 2: a ticker on your Bloomberg Terminal. 21 00:01:08,200 --> 00:01:10,400 Speaker 3: Mirrork Sockey more than one hundred and seventy percent. 22 00:01:10,560 --> 00:01:10,880 Speaker 4: Not bad. 23 00:01:10,959 --> 00:01:13,160 Speaker 2: It's got a ten point five billion dollar market cap, 24 00:01:13,240 --> 00:01:16,920 Speaker 2: all right. But before that XBO, he was chairman and 25 00:01:17,000 --> 00:01:20,800 Speaker 2: CEO of United Waste Management, United Waste Systems, I'm sorry, 26 00:01:21,400 --> 00:01:24,880 Speaker 2: former chairman and CEO of United Rentals. And he's CEO 27 00:01:25,160 --> 00:01:27,480 Speaker 2: of XBO from twenty eleven to twenty twenty two before 28 00:01:27,480 --> 00:01:30,440 Speaker 2: becoming executive chairman. So this is somebody who just can't 29 00:01:30,480 --> 00:01:33,440 Speaker 2: sit still quite the CV Brad Jacobs. He's in our 30 00:01:33,440 --> 00:01:36,039 Speaker 2: Bloomberg andheract the Broker studio today. So Braday, I know 31 00:01:36,040 --> 00:01:38,520 Speaker 2: you've got a new fund out there, a billion dollars. 32 00:01:38,560 --> 00:01:39,920 Speaker 2: I'm guessing most of it. I it's not all of 33 00:01:39,920 --> 00:01:42,840 Speaker 2: it's your money. What are you guys looking to do 34 00:01:42,880 --> 00:01:44,399 Speaker 2: with this new fund? What's next? 35 00:01:44,760 --> 00:01:46,919 Speaker 5: So only nine hundred million is mine, okay. 36 00:01:47,120 --> 00:01:49,920 Speaker 6: The other one hundred million is from friends and family okay, 37 00:01:50,000 --> 00:01:51,560 Speaker 6: the largest one being Sequoy Heritage. 38 00:01:51,600 --> 00:01:52,960 Speaker 2: Oh nice, that's a good family. 39 00:01:52,720 --> 00:01:53,600 Speaker 6: Being real family. 40 00:01:53,680 --> 00:01:55,880 Speaker 5: Yes, I'm a sister of my brother nephews. 41 00:01:56,040 --> 00:01:59,200 Speaker 6: So we're taking that billion dollars and we're putting it 42 00:01:59,280 --> 00:02:02,480 Speaker 6: into a small cap about fifteen to twenty million dollar 43 00:02:02,520 --> 00:02:04,680 Speaker 6: market cap. Well it was, it's double the stock price today, 44 00:02:04,720 --> 00:02:06,560 Speaker 6: so maybe it's thirty or forty million market cap now 45 00:02:06,800 --> 00:02:11,600 Speaker 6: called silver Sun Technologies. And we're then going to spin 46 00:02:11,720 --> 00:02:15,200 Speaker 6: that company back off to the legacy shareholders of silver Sun. 47 00:02:15,320 --> 00:02:18,080 Speaker 6: So in a few months when the deal closes, the 48 00:02:18,120 --> 00:02:20,800 Speaker 6: silver Sun shareholders with other their company back. They'll also 49 00:02:20,800 --> 00:02:23,240 Speaker 6: get a two and a half million dollar dividend, and 50 00:02:23,280 --> 00:02:26,919 Speaker 6: they'll get a about a zero point three percent share 51 00:02:27,080 --> 00:02:28,280 Speaker 6: in my new company. 52 00:02:28,880 --> 00:02:32,640 Speaker 2: And your new company is going to do what Well, 53 00:02:32,680 --> 00:02:35,120 Speaker 2: we haven't announced the industry yet. I wanted there, are 54 00:02:35,120 --> 00:02:39,239 Speaker 2: you gonna use this shell, this publicly, this entity, this 55 00:02:39,360 --> 00:02:42,560 Speaker 2: vehicle to make an acquisition? Absolutely, so tell us. 56 00:02:42,520 --> 00:02:43,440 Speaker 5: What this company. 57 00:02:43,440 --> 00:02:46,720 Speaker 6: This company will be publicly traded, it'll have billion dollars 58 00:02:46,760 --> 00:02:50,079 Speaker 6: in cash, and we'll do the same playbook that I've 59 00:02:50,080 --> 00:02:53,480 Speaker 6: been doing for decades. I'm going to consolidate an industry. 60 00:02:53,520 --> 00:02:56,200 Speaker 6: I'm going to buy companies, I'm going to assimilate them. 61 00:02:56,240 --> 00:02:57,959 Speaker 6: I'm going to improve them. We're going to going to 62 00:02:58,000 --> 00:03:00,320 Speaker 6: get synergy from them. I'm gonna symbol the world class 63 00:03:00,400 --> 00:03:03,560 Speaker 6: team and applied technology, improve the business, and we'll. 64 00:03:03,440 --> 00:03:03,960 Speaker 5: Be off to the race. 65 00:03:04,000 --> 00:03:07,080 Speaker 2: So you've identified the company, you just haven't announced it yet, 66 00:03:07,320 --> 00:03:08,200 Speaker 2: that's correct, So. 67 00:03:08,280 --> 00:03:10,639 Speaker 5: We can you've identified the industry. 68 00:03:10,720 --> 00:03:11,880 Speaker 2: You've identified the industry. 69 00:03:12,600 --> 00:03:15,040 Speaker 6: We don't have a companies per se that we're about 70 00:03:15,040 --> 00:03:16,720 Speaker 6: to buy, although we're talking to several of them. 71 00:03:17,040 --> 00:03:18,679 Speaker 3: Can you tell us what the industry is here? 72 00:03:18,800 --> 00:03:21,399 Speaker 6: Well, we'll play bigger than a small bread. 73 00:03:21,440 --> 00:03:23,040 Speaker 2: So I got to get your back again. And you're like, 74 00:03:23,160 --> 00:03:25,280 Speaker 2: what a week's time or something something like that. All right, 75 00:03:25,360 --> 00:03:27,760 Speaker 2: all right, So what do you look for? I mean, 76 00:03:27,919 --> 00:03:31,680 Speaker 2: waste management logistics. I mean these things aren't sexy, but 77 00:03:31,880 --> 00:03:34,680 Speaker 2: what are you living more sexy? They essentially for your 78 00:03:34,720 --> 00:03:35,320 Speaker 2: bank accounts. 79 00:03:35,440 --> 00:03:37,840 Speaker 6: It means making a lot of money for shareholders, that's right. 80 00:03:37,840 --> 00:03:40,280 Speaker 6: And United Rentals we got in it was it was 81 00:03:40,360 --> 00:03:42,360 Speaker 6: three dollars and fifty cents a share when I started 82 00:03:42,360 --> 00:03:44,560 Speaker 6: the company in nineteen ninety seven. 83 00:03:44,320 --> 00:03:46,880 Speaker 5: And on Friday it was over five hundred dollars a year. 84 00:03:46,920 --> 00:03:51,240 Speaker 6: And XPO Logistics when we started in twenty eleven. Are 85 00:03:51,360 --> 00:03:53,240 Speaker 6: the investors who came in with me made thirty two 86 00:03:53,280 --> 00:03:55,040 Speaker 6: times in money as a last year, So I can 87 00:03:55,040 --> 00:03:56,320 Speaker 6: save that very very sexy. 88 00:03:56,320 --> 00:03:58,400 Speaker 2: When you put it that way. So what legit. What 89 00:03:58,920 --> 00:04:01,120 Speaker 2: characteristics do you look for in a business when you 90 00:04:01,240 --> 00:04:03,640 Speaker 2: go to acquired because you remind me of a a 91 00:04:03,680 --> 00:04:05,320 Speaker 2: gunging off to think of his name again, who did 92 00:04:05,360 --> 00:04:07,880 Speaker 2: this in the cable industry, the radio business and then 93 00:04:08,000 --> 00:04:10,320 Speaker 2: entertainment business up in Boston. Anyway, What do you look 94 00:04:10,360 --> 00:04:12,000 Speaker 2: for in a company or an industry? 95 00:04:12,440 --> 00:04:15,160 Speaker 6: So I look for very specific things. They've all been 96 00:04:15,240 --> 00:04:19,520 Speaker 6: in industrial services, that's my okay. I look for large industries. 97 00:04:19,560 --> 00:04:22,160 Speaker 6: I look for industries that are hundreds of billions of 98 00:04:22,240 --> 00:04:25,320 Speaker 6: dollars in size. I look for ones that there's lots 99 00:04:25,360 --> 00:04:28,640 Speaker 6: of interesting companies to buy. It's not consolidated so much 100 00:04:28,640 --> 00:04:30,240 Speaker 6: as there's not a whole lot to buy. It's still 101 00:04:30,279 --> 00:04:33,919 Speaker 6: fragmented and at reasonable prices at multiples less than what 102 00:04:34,360 --> 00:04:36,280 Speaker 6: we're going to trade out, so we get some accretion. 103 00:04:36,000 --> 00:04:36,760 Speaker 2: From what we're buying. 104 00:04:37,320 --> 00:04:40,719 Speaker 6: And I look for an industry where it's not totally 105 00:04:40,760 --> 00:04:44,040 Speaker 6: tech forward yet and I can take our tech prowess 106 00:04:44,080 --> 00:04:46,799 Speaker 6: and apply it to the industry to get an advantage. 107 00:04:47,160 --> 00:04:50,720 Speaker 3: So what industries do you see that have opportunities? 108 00:04:50,800 --> 00:04:54,320 Speaker 2: At this point, you're not going to give up, so 109 00:04:54,560 --> 00:04:55,200 Speaker 2: stay tuned. 110 00:04:55,520 --> 00:04:57,960 Speaker 6: I will definitely tell the whole world, what industry we're 111 00:04:57,960 --> 00:04:59,360 Speaker 6: going to consolidate but not today. 112 00:05:00,279 --> 00:05:03,359 Speaker 2: What kind of capital structure do you think is appropriate 113 00:05:03,400 --> 00:05:06,159 Speaker 2: today versus maybe when you did United Reynolds, when you 114 00:05:06,200 --> 00:05:10,919 Speaker 2: did XPO. Debt is not free anymore. Talk to us 115 00:05:10,960 --> 00:05:12,479 Speaker 2: about that, and talk to us about maybe if there's 116 00:05:12,480 --> 00:05:14,880 Speaker 2: any other external equity you need, can you get. 117 00:05:14,760 --> 00:05:18,920 Speaker 6: It so in the first instance, will be debt free. 118 00:05:18,960 --> 00:05:21,880 Speaker 6: We'll have a billion dollars of equity that we're putting 119 00:05:21,880 --> 00:05:24,799 Speaker 6: into the company, and we'll have no debt over time. 120 00:05:25,480 --> 00:05:28,080 Speaker 6: To answer your question, I think one or two turns 121 00:05:28,160 --> 00:05:30,479 Speaker 6: is probably a conservative way to approach it, given the 122 00:05:30,480 --> 00:05:33,200 Speaker 6: world and the turbulence and the risk risky nature of 123 00:05:33,240 --> 00:05:36,480 Speaker 6: what's going on in geopolitics, and in terms of it available, 124 00:05:36,680 --> 00:05:39,200 Speaker 6: there's no never any problem raising money if you've got 125 00:05:39,200 --> 00:05:40,840 Speaker 6: a good track record and you have a good team, 126 00:05:40,920 --> 00:05:42,599 Speaker 6: and you have a good business plan. So I'm not 127 00:05:42,640 --> 00:05:44,000 Speaker 6: worried about access to capital. 128 00:05:44,360 --> 00:05:46,400 Speaker 3: What do you think that tells us about the direction 129 00:05:46,480 --> 00:05:47,640 Speaker 3: of the economy right now? 130 00:05:48,920 --> 00:05:49,400 Speaker 5: Well, I don't. 131 00:05:49,520 --> 00:05:51,560 Speaker 6: I'm not going to give it prediction because my prediction 132 00:05:51,600 --> 00:05:53,560 Speaker 6: has been bad last year and a half, like most 133 00:05:53,560 --> 00:05:55,919 Speaker 6: everyone else year and a half two years ago, I 134 00:05:55,920 --> 00:05:58,479 Speaker 6: thought a recession was coming, and no recession camp so 135 00:05:58,920 --> 00:06:02,080 Speaker 6: I've withdrawn my convey on particular the economy. Having said that, 136 00:06:02,520 --> 00:06:04,680 Speaker 6: I do see it being generally soft out there in 137 00:06:04,720 --> 00:06:07,200 Speaker 6: Europe and the United States, and I see it slowing. 138 00:06:07,200 --> 00:06:08,240 Speaker 6: I don't see it picking up. 139 00:06:09,160 --> 00:06:12,760 Speaker 2: So in your investments, let's say, what you're looking at 140 00:06:12,880 --> 00:06:15,599 Speaker 2: coming forward? Is it Do you prefer to stay in 141 00:06:15,600 --> 00:06:17,880 Speaker 2: the US, You're looking for a global business? How do 142 00:06:17,920 --> 00:06:19,960 Speaker 2: you just think about g geography? Because a lot of 143 00:06:20,000 --> 00:06:22,560 Speaker 2: folks are saying, I can't go to China, Europe's to 144 00:06:23,600 --> 00:06:26,080 Speaker 2: the growth isn't there in Europe for me? How do 145 00:06:26,120 --> 00:06:26,760 Speaker 2: you think about it? 146 00:06:27,400 --> 00:06:30,120 Speaker 6: Well, Asia has an extra level of risk because what's 147 00:06:30,120 --> 00:06:32,920 Speaker 6: going on with China, So I'm not eager to get 148 00:06:32,800 --> 00:06:36,400 Speaker 6: into Asia. I liked North America a lot, like the 149 00:06:36,520 --> 00:06:38,960 Speaker 6: United States a real lot for all the obvious reasons. 150 00:06:39,320 --> 00:06:43,400 Speaker 6: But I don't mind Western Europe, France, UK, Spain, Germany. 151 00:06:43,760 --> 00:06:46,279 Speaker 6: These are great countries with big economies and. 152 00:06:46,400 --> 00:06:49,880 Speaker 2: The rule of law. So what we saw during the 153 00:06:49,920 --> 00:06:55,320 Speaker 2: pandemic was a sense of reshoring or friend shoring, that 154 00:06:55,360 --> 00:06:58,479 Speaker 2: type of thing. Did you see that? Do you see 155 00:06:58,480 --> 00:07:00,440 Speaker 2: that at XBO? And how does maybe how does that 156 00:07:01,200 --> 00:07:03,960 Speaker 2: change our supply chain because I kind of grew up 157 00:07:04,080 --> 00:07:06,640 Speaker 2: in an era that was all about globalization, more and 158 00:07:06,640 --> 00:07:09,040 Speaker 2: more globalization that seems so installed a little bit. 159 00:07:09,279 --> 00:07:11,960 Speaker 6: Ins stalled a lot. I see that more in our 160 00:07:12,680 --> 00:07:16,080 Speaker 6: supply chain spin off GXO Logistics, which has about two 161 00:07:16,160 --> 00:07:20,160 Speaker 6: hundred million square feet of warehouses across a thousand warehouses 162 00:07:20,480 --> 00:07:23,160 Speaker 6: around the world. There you've seen a lot of our 163 00:07:23,240 --> 00:07:26,080 Speaker 6: customers who had a lot big part of their supply 164 00:07:26,160 --> 00:07:30,960 Speaker 6: chain originating in China migrate to Malaysia, to Vietnam, to India, 165 00:07:31,240 --> 00:07:34,160 Speaker 6: to Mexico back to the United States. So that's trend 166 00:07:34,200 --> 00:07:36,160 Speaker 6: that's probably not going to turn around. I think people 167 00:07:36,240 --> 00:07:39,400 Speaker 6: want to de risk being dependent on China. 168 00:07:39,000 --> 00:07:41,160 Speaker 3: And especially when it comes to the supply chains and 169 00:07:41,160 --> 00:07:43,760 Speaker 3: what we just went through because of the pandemic. Where 170 00:07:43,760 --> 00:07:46,760 Speaker 3: are you seeing improvements and where are there still some 171 00:07:46,960 --> 00:07:50,360 Speaker 3: lags there that are issues for the broader global supply chain. 172 00:07:50,480 --> 00:07:52,760 Speaker 6: Oh, the supply chain has normalized quite a bit. It's 173 00:07:52,800 --> 00:07:54,520 Speaker 6: not anything like it was a couple of years ago 174 00:07:54,640 --> 00:07:57,360 Speaker 6: during COVID, when it was hard to get anything and 175 00:07:57,400 --> 00:07:59,520 Speaker 6: things move very slowly and the prices were real high. 176 00:07:59,680 --> 00:08:03,920 Speaker 6: The price of freight transportation and logistics in general has 177 00:08:03,960 --> 00:08:08,720 Speaker 6: come down a lot, and it's capacity. The availability of 178 00:08:09,080 --> 00:08:11,080 Speaker 6: transportation is available quite a bit. 179 00:08:11,520 --> 00:08:14,400 Speaker 2: So what's the biggest challenge as you think about it. 180 00:08:14,440 --> 00:08:16,760 Speaker 2: I mean, you're going to put some capital to work here. 181 00:08:18,120 --> 00:08:20,000 Speaker 2: What do you think, just broadly defined out, some of 182 00:08:20,000 --> 00:08:22,880 Speaker 2: the biggest challenges that you're going to have for again, 183 00:08:23,160 --> 00:08:26,760 Speaker 2: redoing your playbook, growing, maybe through acquisition and so on 184 00:08:26,800 --> 00:08:28,120 Speaker 2: and so forth. What do you think some of the 185 00:08:28,160 --> 00:08:29,840 Speaker 2: challenges over the next several years for you? 186 00:08:29,920 --> 00:08:32,800 Speaker 6: The most important thing that has to be accomplished in 187 00:08:32,840 --> 00:08:34,920 Speaker 6: any business plan, but particularly one that's going to be 188 00:08:35,200 --> 00:08:37,360 Speaker 6: high growth and where we're aiming for the stars in 189 00:08:37,480 --> 00:08:40,840 Speaker 6: terms of very high returns to shareholders is people. You've 190 00:08:40,840 --> 00:08:43,679 Speaker 6: got to assemble a world class real world class, not 191 00:08:43,720 --> 00:08:47,600 Speaker 6: even first class, a world class management team that's hard working, 192 00:08:47,640 --> 00:08:50,000 Speaker 6: that's honest, that gets along well and plays well in 193 00:08:50,000 --> 00:08:54,400 Speaker 6: the play in the sandbox together, is super smart, very focused, 194 00:08:54,480 --> 00:08:57,200 Speaker 6: really understands what they're doing on top of everything. And 195 00:08:57,280 --> 00:09:00,400 Speaker 6: if you can get a management team assembled, it's got 196 00:09:00,440 --> 00:09:01,720 Speaker 6: those kind of superstars. 197 00:09:01,960 --> 00:09:02,360 Speaker 5: The rest. 198 00:09:02,520 --> 00:09:04,720 Speaker 6: I won't say it's super easy, because nothing's super easy, 199 00:09:04,760 --> 00:09:06,040 Speaker 6: but it's relatively easy. 200 00:09:06,520 --> 00:09:09,199 Speaker 3: What's one of the top questions that you get from shareholders. 201 00:09:10,800 --> 00:09:13,320 Speaker 6: Well, shareholders are always thinking about well depends which sheholder 202 00:09:13,320 --> 00:09:13,920 Speaker 6: you're talking about. 203 00:09:14,120 --> 00:09:15,480 Speaker 5: So there's two categories there. 204 00:09:15,679 --> 00:09:18,000 Speaker 6: You have short term and long term. So the hedge 205 00:09:18,000 --> 00:09:20,719 Speaker 6: funds and some of the high velocity funds, they're very 206 00:09:20,720 --> 00:09:24,080 Speaker 6: interested in the quarter, maybe the next quarter right the most, 207 00:09:24,160 --> 00:09:26,400 Speaker 6: the outlook for the next year. But the long only 208 00:09:26,520 --> 00:09:30,240 Speaker 6: institutions who own five, ten, fifteen percent of a company 209 00:09:30,679 --> 00:09:33,560 Speaker 6: and are owning it for several years, they're seeing way 210 00:09:33,559 --> 00:09:36,680 Speaker 6: past that. They're not so interested in the quarter. That's interesting, 211 00:09:36,720 --> 00:09:39,040 Speaker 6: but it's not the real focus. The focus is how 212 00:09:39,080 --> 00:09:40,839 Speaker 6: are you going to grow the business? How are you 213 00:09:40,880 --> 00:09:42,840 Speaker 6: going to grow this business over the next five years, 214 00:09:42,840 --> 00:09:44,719 Speaker 6: over the next ten years, how you what kind of 215 00:09:44,840 --> 00:09:46,760 Speaker 6: organic growth a you're going to have, what kind of 216 00:09:46,760 --> 00:09:49,440 Speaker 6: margin expansion you're going to have, What are you looking 217 00:09:49,440 --> 00:09:52,600 Speaker 6: at in terms of return on capital? And what is 218 00:09:52,640 --> 00:09:55,360 Speaker 6: the specific business plan and the levers we should watch 219 00:09:55,679 --> 00:09:57,560 Speaker 6: in order to hold you accountable. Those are the kind 220 00:09:57,600 --> 00:10:00,520 Speaker 6: of questions that the serious shareholders at all. 221 00:10:00,600 --> 00:10:03,240 Speaker 2: Right, we'll be paying attention. We're watching the Bloomberg terminal 222 00:10:03,320 --> 00:10:05,880 Speaker 2: to see if that headline go across Brad Jacobs. He's 223 00:10:05,960 --> 00:10:08,880 Speaker 2: executive chairman for now of XPO, which is in New York. 224 00:10:08,880 --> 00:10:12,600 Speaker 2: Stock executive just say, okay, he's gonna end. He's got 225 00:10:12,600 --> 00:10:14,320 Speaker 2: a new he's got a new fund out there, folks. 226 00:10:14,360 --> 00:10:16,480 Speaker 2: So you know, keep an eye out on your Bloomberg criminals. 227 00:10:16,480 --> 00:10:19,600 Speaker 2: See what the Brad and his team go for next. 228 00:10:19,600 --> 00:10:23,680 Speaker 2: Brad Jacobs, executive Chairman XPO. In our Bloomberg Interactive Brokers studio. 229 00:10:24,920 --> 00:10:28,319 Speaker 4: You're listening to the team. Ken's a live program Bloomberg 230 00:10:28,360 --> 00:10:31,720 Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot Com, 231 00:10:31,800 --> 00:10:34,960 Speaker 4: the iHeartRadio app, and the Bloomberg Business App, or listen 232 00:10:35,040 --> 00:10:37,319 Speaker 4: on demand wherever you get your podcasts. 233 00:10:39,120 --> 00:10:41,480 Speaker 3: Paul, as we were talking about earlier, taking a look 234 00:10:41,520 --> 00:10:46,120 Speaker 3: at Spotify, reducing its workforce by seventeen percent in the 235 00:10:46,120 --> 00:10:49,320 Speaker 3: company steves cuts yet this year is part of an 236 00:10:49,320 --> 00:10:53,080 Speaker 3: aggressive effort to shrink costs and drive profitability. If you 237 00:10:53,080 --> 00:10:55,920 Speaker 3: look at that stock ticker symbol spot up about eight 238 00:10:56,000 --> 00:10:58,760 Speaker 3: percent this morning, on pace for its best day since 239 00:10:58,840 --> 00:11:00,960 Speaker 3: late October. If you look at your date, up over 240 00:11:01,080 --> 00:11:05,319 Speaker 3: one hundred and forty five percent. Who better to chat 241 00:11:05,320 --> 00:11:08,360 Speaker 3: with us about the latest news with Spotify than Ashley Carmen, 242 00:11:08,480 --> 00:11:11,920 Speaker 3: reporter with Bloomberg News covering the auto industry, joining us 243 00:11:12,000 --> 00:11:14,840 Speaker 3: on zoom. Ashley walk us through the latest with Spotify. 244 00:11:14,880 --> 00:11:15,800 Speaker 3: What do we need to know here? 245 00:11:17,160 --> 00:11:20,360 Speaker 7: Yeah, so, I mean, obviously the big headline seventeen percent 246 00:11:20,360 --> 00:11:25,600 Speaker 7: of employees fifteen hundred people. Really awful, really really awful. 247 00:11:25,640 --> 00:11:28,360 Speaker 7: It's a third cut this year. Spotify has really been 248 00:11:28,440 --> 00:11:33,400 Speaker 7: under pressure from investors to cut costs achieve profitability. Spotify 249 00:11:33,440 --> 00:11:36,840 Speaker 7: invested heavily in the podcast space, and investors believed that 250 00:11:36,840 --> 00:11:38,880 Speaker 7: that was a bad one and we're really seeing the 251 00:11:38,920 --> 00:11:40,640 Speaker 7: repercussions of it into this year. 252 00:11:41,040 --> 00:11:44,200 Speaker 2: All right, So, I mean the stockstone great. I'm looking 253 00:11:44,280 --> 00:11:47,240 Speaker 2: on the FA function of the Bloomberg terminal. Analysts are 254 00:11:47,280 --> 00:11:50,320 Speaker 2: expecting this company to turn profitable in twenty twenty four. 255 00:11:50,440 --> 00:11:54,560 Speaker 2: So it seems like the company's in good space. Do 256 00:11:54,559 --> 00:11:57,559 Speaker 2: you feel like this is an announcement of coming from 257 00:11:57,640 --> 00:11:59,880 Speaker 2: a point of strength or not. 258 00:12:02,679 --> 00:12:04,760 Speaker 7: It feels like it's coming from a point of strength. 259 00:12:04,760 --> 00:12:09,360 Speaker 7: Although it is surprising. It does make me wonder about 260 00:12:09,400 --> 00:12:12,120 Speaker 7: the status of the podcast business. We've already seen them 261 00:12:12,200 --> 00:12:15,400 Speaker 7: cut significantly in that department. They cut two percent of 262 00:12:15,440 --> 00:12:18,320 Speaker 7: the workforce in June primarily in podcasting. So it does 263 00:12:18,360 --> 00:12:22,640 Speaker 7: make me wonder if that bet continues to just not 264 00:12:22,800 --> 00:12:26,520 Speaker 7: pay off and they continue to recognize it, or if 265 00:12:26,520 --> 00:12:28,440 Speaker 7: they think that they're just going to have to brand 266 00:12:28,480 --> 00:12:30,720 Speaker 7: into new areas and that they'll have to cut costs 267 00:12:30,760 --> 00:12:32,000 Speaker 7: to do so. 268 00:12:32,040 --> 00:12:34,920 Speaker 3: Talk to us about the issues they've had with losing 269 00:12:34,960 --> 00:12:37,480 Speaker 3: money just in due to terms of when it comes 270 00:12:37,480 --> 00:12:40,280 Speaker 3: to licensing agreements with music right holders. 271 00:12:41,679 --> 00:12:43,840 Speaker 7: Yeah, so they have to pay a substantial portion of 272 00:12:43,840 --> 00:12:46,240 Speaker 7: their revenue to the rights holders, of course, because in 273 00:12:46,320 --> 00:12:48,680 Speaker 7: order to have a music streaming service, you have to 274 00:12:48,720 --> 00:12:52,160 Speaker 7: license the music, and of course the labels want their 275 00:12:52,240 --> 00:12:55,760 Speaker 7: fair share. So that has been a real challenge for Spotify, 276 00:12:55,800 --> 00:12:58,439 Speaker 7: which is why it has attempted to diversify its business 277 00:12:58,440 --> 00:13:01,679 Speaker 7: by moving into podcasts and then most recently, it began 278 00:13:01,760 --> 00:13:04,959 Speaker 7: offering audiobooks as part of premium subscriptions on its service. 279 00:13:06,280 --> 00:13:09,120 Speaker 2: Talk to us about the I guess the competitive environment 280 00:13:09,160 --> 00:13:12,120 Speaker 2: here for streaming music. Just if you get set out 281 00:13:12,160 --> 00:13:14,800 Speaker 2: kind of where Spotify fits in this. I'm not a 282 00:13:14,800 --> 00:13:18,080 Speaker 2: big streamer of music, but you know, I don't know, 283 00:13:18,200 --> 00:13:20,040 Speaker 2: I mean, there's a lot out there. I mean, iHeart 284 00:13:20,040 --> 00:13:21,280 Speaker 2: and everything. Just give us a sense of what the 285 00:13:21,280 --> 00:13:22,480 Speaker 2: competitive landscape looks like. 286 00:13:23,760 --> 00:13:28,640 Speaker 7: Yeah, So Spotify is the largest streaming service pretty much globally, 287 00:13:30,200 --> 00:13:33,760 Speaker 7: and they're independent. They are not tied to a tech platform, 288 00:13:33,760 --> 00:13:36,400 Speaker 7: which their primary competitors are. So you have Apple Music, 289 00:13:36,559 --> 00:13:39,080 Speaker 7: Amazon Music. You mentioned iHeart. I mean, that's obviously a 290 00:13:39,080 --> 00:13:43,360 Speaker 7: big US company in radio, but their primary competitors here 291 00:13:43,400 --> 00:13:47,240 Speaker 7: are Apple Music and Amazon Music, and those two really 292 00:13:47,240 --> 00:13:49,240 Speaker 7: have the benefit of being tied through tech companies. So 293 00:13:49,240 --> 00:13:52,000 Speaker 7: Spotify is trying to make it on its own as 294 00:13:52,000 --> 00:13:55,760 Speaker 7: an independent and make the economics work, which is a challenge. 295 00:13:55,960 --> 00:13:59,760 Speaker 3: So do other players in the industry face similar issues 296 00:13:59,800 --> 00:14:01,880 Speaker 3: just Spotify or is it just more unique to that 297 00:14:01,960 --> 00:14:04,000 Speaker 3: company given what you were talking about when it comes 298 00:14:04,040 --> 00:14:06,920 Speaker 3: to another platform like Apple Music, when you're a part 299 00:14:07,000 --> 00:14:10,960 Speaker 3: of a much bigger technology company, maybe you're more immune. 300 00:14:13,440 --> 00:14:15,600 Speaker 7: I think it could be that there may be more immune. 301 00:14:15,600 --> 00:14:17,360 Speaker 7: But Spotify really came out to get I mean, they 302 00:14:17,400 --> 00:14:20,720 Speaker 7: spent over a billion dollars on podcasting, so they were 303 00:14:20,760 --> 00:14:24,160 Speaker 7: the ones that made that huge, huge bet and push 304 00:14:24,280 --> 00:14:26,520 Speaker 7: on that space, which I think puts them in a 305 00:14:26,560 --> 00:14:29,040 Speaker 7: really unique position. And I do think that they also 306 00:14:29,800 --> 00:14:32,920 Speaker 7: have to diversify to survive. Where is it as possible 307 00:14:33,000 --> 00:14:36,240 Speaker 7: that Apple Music and Amazon Music can kind of they 308 00:14:36,320 --> 00:14:39,840 Speaker 7: squarely focused on music and be Okay, how much of. 309 00:14:39,800 --> 00:14:44,160 Speaker 2: Their business is subscription versus advertising and where does the 310 00:14:44,200 --> 00:14:46,960 Speaker 2: market feel like maybe the most growth can come from. 311 00:14:48,400 --> 00:14:52,920 Speaker 7: They've continued to grow their subscriptions, which quarter or over 312 00:14:53,000 --> 00:14:57,000 Speaker 7: quarter has just been a wild, amazing testament to the 313 00:14:57,040 --> 00:15:01,160 Speaker 7: strength of Spotify. They continue to grow subscribers the advertising business. 314 00:15:01,640 --> 00:15:03,880 Speaker 7: They have free users, of course, and I think as 315 00:15:03,880 --> 00:15:07,680 Speaker 7: they move into more developing countries like India, those users, 316 00:15:07,680 --> 00:15:10,680 Speaker 7: of course are going to potentially beyond cheaper plans or 317 00:15:10,760 --> 00:15:13,520 Speaker 7: free plans, so advertising could become a bigger part of 318 00:15:13,520 --> 00:15:16,200 Speaker 7: the story. But really they are subscription business and investors 319 00:15:16,240 --> 00:15:17,680 Speaker 7: want to see subscriptions. 320 00:15:18,360 --> 00:15:22,080 Speaker 3: And this does come during a year where Taylor Swift 321 00:15:22,160 --> 00:15:26,320 Speaker 3: had quite the momentum on Spotify. So how is it 322 00:15:26,400 --> 00:15:29,040 Speaker 3: when you have someone that's successful on that's still maybe 323 00:15:29,040 --> 00:15:32,640 Speaker 3: not enough to prevent Spotify from having to go through 324 00:15:32,640 --> 00:15:34,200 Speaker 3: these different cost cutting efforts. 325 00:15:35,720 --> 00:15:38,960 Speaker 7: Yeah, I mean Taylor Swift, of course, super successful, Beyonce Drake, 326 00:15:39,040 --> 00:15:40,680 Speaker 7: all of them. But at the end of the day, 327 00:15:41,160 --> 00:15:43,880 Speaker 7: Spotify has to pay royalties every single time someone listens 328 00:15:43,920 --> 00:15:47,200 Speaker 7: to those songs. So they're not getting to necessarily benefit 329 00:15:47,200 --> 00:15:49,680 Speaker 7: from that. I mean they get subscribers and they make 330 00:15:49,760 --> 00:15:52,720 Speaker 7: some money, but not enough to offset just the fact 331 00:15:52,720 --> 00:15:55,200 Speaker 7: that people are obsessed with Taylor Swift. I mean that's 332 00:15:55,200 --> 00:15:57,600 Speaker 7: why that podcast that where they don't have to pay 333 00:15:57,680 --> 00:16:02,320 Speaker 7: royalties whenever someone listens to a podcast with smart But 334 00:16:02,720 --> 00:16:05,240 Speaker 7: the question is can they actually build business around it? 335 00:16:05,320 --> 00:16:06,320 Speaker 7: And isn't working? 336 00:16:06,600 --> 00:16:06,800 Speaker 8: Right? 337 00:16:06,920 --> 00:16:08,600 Speaker 3: So Taylor Swift is actually going to earn more than 338 00:16:08,640 --> 00:16:12,880 Speaker 3: one hundred million dollars in Spotify royalties for twenty seven yes, 339 00:16:12,920 --> 00:16:14,320 Speaker 3: oh my good, breaking it in. 340 00:16:14,760 --> 00:16:18,560 Speaker 2: So where are we with the podcast business? Actually? I 341 00:16:18,600 --> 00:16:21,200 Speaker 2: mean are they still committed to it? How did they 342 00:16:21,400 --> 00:16:23,520 Speaker 2: phrase kind of how they're going to invest in that 343 00:16:23,600 --> 00:16:25,520 Speaker 2: going forward, because I know that was a concern as 344 00:16:25,560 --> 00:16:27,080 Speaker 2: you mentioned before for a lot of investors. 345 00:16:29,160 --> 00:16:33,200 Speaker 7: You know, they still have at least prior to these cuts, 346 00:16:33,240 --> 00:16:35,960 Speaker 7: they still had a podcast department that was dedicated to 347 00:16:36,000 --> 00:16:39,880 Speaker 7: doing original programming. I think after these cuts will find 348 00:16:39,880 --> 00:16:42,479 Speaker 7: out more about what the state is of those shows. 349 00:16:43,120 --> 00:16:45,440 Speaker 7: But really where I have seen the company focus has 350 00:16:45,440 --> 00:16:48,840 Speaker 7: been on advertising. They really want to not only put 351 00:16:48,880 --> 00:16:52,600 Speaker 7: podcast advertisements behind their own programming, but also behind their 352 00:16:52,640 --> 00:16:55,560 Speaker 7: third party partnerships with people like Joe Rogan and Dak Shepherd, 353 00:16:55,840 --> 00:16:59,040 Speaker 7: as well as people who use one of their hosting services, 354 00:16:59,080 --> 00:17:01,800 Speaker 7: So that could be places like MPR, for example, uses 355 00:17:01,840 --> 00:17:05,520 Speaker 7: their service they put ads on their shows. So that 356 00:17:05,560 --> 00:17:09,360 Speaker 7: has really been the focus moving forward for Spotify, and 357 00:17:10,119 --> 00:17:12,720 Speaker 7: that was a newer goal. So I think we're still 358 00:17:12,760 --> 00:17:15,600 Speaker 7: trying to figure out whether that's going to pay off. 359 00:17:15,840 --> 00:17:18,280 Speaker 3: We only have about a minute left. But do you 360 00:17:18,480 --> 00:17:22,480 Speaker 3: see further job cuts coming in the next few months 361 00:17:22,720 --> 00:17:24,200 Speaker 3: or the next year, or do you think this will 362 00:17:24,240 --> 00:17:25,840 Speaker 3: be limited to what we saw today. 363 00:17:27,400 --> 00:17:30,640 Speaker 7: In his blog post, the CEO Daniel X said that 364 00:17:30,800 --> 00:17:34,199 Speaker 7: this decision was made to avoid further cuts into the 365 00:17:34,240 --> 00:17:38,160 Speaker 7: next year or two, so that's where he's at with it. 366 00:17:38,960 --> 00:17:41,280 Speaker 7: I would hope for the sake of the employees that's 367 00:17:41,400 --> 00:17:43,600 Speaker 7: the case, because this has probably been a pretty traumatic 368 00:17:43,640 --> 00:17:46,119 Speaker 7: year for them. But yeah, as of right now, that 369 00:17:46,200 --> 00:17:47,040 Speaker 7: that's kind of what we know. 370 00:17:47,720 --> 00:17:49,679 Speaker 2: All right, Ashley, thank you so much for joining us. 371 00:17:49,680 --> 00:17:52,879 Speaker 2: Really appreciate it, appreciate the reporting there. Ashley Carmen, reporter 372 00:17:52,920 --> 00:17:55,560 Speaker 2: for Bloomberg News, talking about Spotify again, one of the 373 00:17:55,560 --> 00:17:58,600 Speaker 2: bigger stories today on the Bloomberg terminal cutting fifteen hundred jobs. 374 00:17:59,040 --> 00:18:00,800 Speaker 2: You take a look at the stock and it's been 375 00:18:01,200 --> 00:18:03,760 Speaker 2: all over but it's had again up you. 376 00:18:03,760 --> 00:18:06,119 Speaker 3: Know, up over one hundred and forty five percent a 377 00:18:06,200 --> 00:18:06,640 Speaker 3: year to date. 378 00:18:06,880 --> 00:18:08,960 Speaker 2: Yeah, but he just pull up the max chart here. 379 00:18:09,040 --> 00:18:12,080 Speaker 2: I mean, it's obviously well, it's spiked and got up 380 00:18:12,080 --> 00:18:14,080 Speaker 2: to three hundred and fifty dollars three hundred and fifty 381 00:18:14,119 --> 00:18:16,199 Speaker 2: five dollars a share, you know, back in kind of 382 00:18:16,320 --> 00:18:18,960 Speaker 2: the beginning of twenty twenty one. So it's got a 383 00:18:18,960 --> 00:18:20,800 Speaker 2: lot of work to retrace, so it's not nearest all 384 00:18:20,800 --> 00:18:23,359 Speaker 2: time high, but it's definitely moving higher. And again this 385 00:18:23,440 --> 00:18:26,320 Speaker 2: is another tech story, much like meta, where you're getting 386 00:18:26,359 --> 00:18:29,800 Speaker 2: rewarded for cutting your costs and focusing on profitability, which 387 00:18:29,880 --> 00:18:32,680 Speaker 2: was different from you know, just several years ago, when 388 00:18:32,760 --> 00:18:35,480 Speaker 2: a lot of these text stories were rewarded simply for 389 00:18:35,560 --> 00:18:37,880 Speaker 2: growing top line growth with whether that's reven or even 390 00:18:37,880 --> 00:18:40,560 Speaker 2: subscribers or anything like that. Now the metric has become 391 00:18:41,280 --> 00:18:44,080 Speaker 2: profitability kind of the way it probably always should have been. 392 00:18:44,520 --> 00:18:47,639 Speaker 4: You're listening to the tape. Can's are Live program Bloomberg 393 00:18:47,680 --> 00:18:51,280 Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio. The 394 00:18:51,359 --> 00:18:54,560 Speaker 4: tune in app Bloomberg dot Com and the Bloomberg Business App. 395 00:18:54,640 --> 00:18:57,440 Speaker 4: You can also listen live on Amazon Alexa from our 396 00:18:57,440 --> 00:19:01,439 Speaker 4: flagship New York station just Say Alexa playing Bloomberg eleven. 397 00:19:03,200 --> 00:19:05,520 Speaker 2: Jess and I have talked about a big, big story 398 00:19:05,600 --> 00:19:08,720 Speaker 2: in the stock market, in the economy in twenty twenty 399 00:19:08,720 --> 00:19:13,080 Speaker 2: three has been AI can nowhere, and now every company 400 00:19:13,119 --> 00:19:14,960 Speaker 2: talks about it. I don't care what business they're in, 401 00:19:15,000 --> 00:19:20,159 Speaker 2: the trans transform, disruptor and I don't know. But there 402 00:19:20,160 --> 00:19:22,720 Speaker 2: are legal issues associated with this which I think we're 403 00:19:22,840 --> 00:19:27,000 Speaker 2: just starting to get our arms around, and that is 404 00:19:27,080 --> 00:19:30,760 Speaker 2: includes an area of in marketing and advertising, So that's 405 00:19:30,760 --> 00:19:32,720 Speaker 2: a big issue. The question is is it a slippery 406 00:19:32,720 --> 00:19:35,280 Speaker 2: slope or a good idea? The person has the answer 407 00:19:35,320 --> 00:19:37,439 Speaker 2: to that question is Ronnie is set Home. She's a 408 00:19:37,440 --> 00:19:40,119 Speaker 2: managing partner set Home Law Group. So Ronnie, when I 409 00:19:40,160 --> 00:19:45,400 Speaker 2: think about I'm just reading your stuff here. Only something 410 00:19:45,480 --> 00:19:47,320 Speaker 2: this is according to the US Copyright offic is only 411 00:19:47,359 --> 00:19:50,600 Speaker 2: something generated by a person can be copyrighted, and AI 412 00:19:50,720 --> 00:19:53,240 Speaker 2: is not a person under copyright or patent law. So 413 00:19:53,359 --> 00:19:55,960 Speaker 2: if AI is used to come up with an advertising campaign, 414 00:19:56,000 --> 00:19:59,520 Speaker 2: a marketing campaign, who owns it? And aren't they using 415 00:19:59,600 --> 00:20:03,760 Speaker 2: maybe stuff that was created by a human that's protected 416 00:20:03,760 --> 00:20:05,200 Speaker 2: by copyright. And how's all that work? 417 00:20:05,880 --> 00:20:08,919 Speaker 8: Yeah, it's complicated. It is only protected if it's written 418 00:20:09,000 --> 00:20:12,360 Speaker 8: by a human being, and the application will denote who 419 00:20:12,400 --> 00:20:15,439 Speaker 8: owns it. Typically they'll put a company name. Anyway, we 420 00:20:15,520 --> 00:20:18,040 Speaker 8: may never know whether it was written by AI. But 421 00:20:18,200 --> 00:20:21,040 Speaker 8: some things that can happen is that as AI is 422 00:20:21,440 --> 00:20:25,360 Speaker 8: learning whatever that means, it may be overly inspired by 423 00:20:25,400 --> 00:20:30,080 Speaker 8: something that was written by somebody else, and that's a landmine. Also, 424 00:20:30,160 --> 00:20:34,080 Speaker 8: the voice of the person may change slightly, and the 425 00:20:34,119 --> 00:20:37,719 Speaker 8: messaging may not be exactly what you want. Right. We're 426 00:20:37,760 --> 00:20:41,200 Speaker 8: emotional creatures as humans, and marketing just hits that nail 427 00:20:41,280 --> 00:20:43,640 Speaker 8: right on the head. I'm not sure if AI has 428 00:20:43,640 --> 00:20:45,800 Speaker 8: honed in on our feelings just yet. 429 00:20:45,960 --> 00:20:49,159 Speaker 3: What are some examples of some companies that may have 430 00:20:49,240 --> 00:20:51,440 Speaker 3: run up against some legal issues here when it comes 431 00:20:51,480 --> 00:20:52,560 Speaker 3: to AI in marketing. 432 00:20:53,600 --> 00:20:56,439 Speaker 8: Well, I think we spoke previously a little bit about 433 00:20:56,480 --> 00:20:59,320 Speaker 8: Sarah Silverman saying that whatever they're doing with her book 434 00:20:59,880 --> 00:21:03,720 Speaker 8: is is a copyright infringement because AI is learning her 435 00:21:03,760 --> 00:21:06,480 Speaker 8: book and other people's books, of course, and then they're 436 00:21:06,480 --> 00:21:09,439 Speaker 8: going to market something as a result. We don't know 437 00:21:09,480 --> 00:21:13,679 Speaker 8: what it is yet, But she recently found herself in 438 00:21:13,680 --> 00:21:16,320 Speaker 8: a setback in court and the court said that she 439 00:21:16,359 --> 00:21:20,240 Speaker 8: did not prove her case and she didn't allege the 440 00:21:20,320 --> 00:21:25,320 Speaker 8: facts needed to proceed. So I think everyone is still 441 00:21:25,359 --> 00:21:28,480 Speaker 8: having this huge learning curve and we all need to 442 00:21:28,720 --> 00:21:31,880 Speaker 8: study hard to figure out where our options lie. 443 00:21:32,000 --> 00:21:34,320 Speaker 2: What you use in your note here, you just had 444 00:21:35,000 --> 00:21:36,800 Speaker 2: as an example of where this could be is that 445 00:21:36,880 --> 00:21:41,360 Speaker 2: these machines go out and start aggregating information. They may 446 00:21:41,400 --> 00:21:43,760 Speaker 2: go out and if they're looking for an advertising tagline, 447 00:21:44,240 --> 00:21:47,080 Speaker 2: nothing gets between me and Mike Calvin's, which was just 448 00:21:47,119 --> 00:21:54,320 Speaker 2: a kind of campaign starring Brookes Shields. Im it worked 449 00:21:54,359 --> 00:21:57,200 Speaker 2: because that's all people talked about for a very long 450 00:21:57,240 --> 00:22:00,560 Speaker 2: time about this this product. But let's say a machine 451 00:22:00,600 --> 00:22:03,639 Speaker 2: goes out there and grabs that, yes, and somehow that 452 00:22:03,680 --> 00:22:10,280 Speaker 2: gets incorporated into a marketing campaign. Somebody owns that copyright too. 453 00:22:10,400 --> 00:22:12,399 Speaker 2: Nothing gets between me and my Calvins. I don't know 454 00:22:12,400 --> 00:22:15,680 Speaker 2: if it's kaviakline or the ad agency or whatever. Somebody's 455 00:22:15,680 --> 00:22:16,639 Speaker 2: got to do the homework on that. 456 00:22:17,119 --> 00:22:19,360 Speaker 8: Yes, it is very important if you're going to use 457 00:22:19,440 --> 00:22:21,639 Speaker 8: machines to help you that you have to check the 458 00:22:21,680 --> 00:22:25,120 Speaker 8: machines work you can't just accept whatever it is generated. 459 00:22:25,480 --> 00:22:26,440 Speaker 2: Do you think that's happening? 460 00:22:27,560 --> 00:22:31,000 Speaker 8: Uh? Not really. I think that AI is making a 461 00:22:31,080 --> 00:22:33,760 Speaker 8: lot of things easier and streamlining a lot of processes. 462 00:22:33,880 --> 00:22:37,240 Speaker 8: And again we like that right as people. I mean, 463 00:22:37,359 --> 00:22:39,639 Speaker 8: look what happened with computers. Everybody was against them. Oh 464 00:22:39,680 --> 00:22:42,080 Speaker 8: my goodness, y two K we're all going to die. 465 00:22:42,119 --> 00:22:44,880 Speaker 8: I think that happened and it was wrong. So we 466 00:22:45,280 --> 00:22:46,440 Speaker 8: love things that are convenient. 467 00:22:46,640 --> 00:22:49,680 Speaker 3: What industries are using AI and marketing the most right now? 468 00:22:50,280 --> 00:22:53,520 Speaker 8: I think all industries are using the board across the board, 469 00:22:53,560 --> 00:22:56,760 Speaker 8: and we just don't know it. I think that you know, 470 00:22:56,800 --> 00:23:00,960 Speaker 8: they take aggregated information. For example, a hospital, right, how 471 00:23:01,040 --> 00:23:04,480 Speaker 8: many I don't know how many people are going to 472 00:23:04,520 --> 00:23:08,240 Speaker 8: that hospital for some kind of sports injury. Well, they're 473 00:23:08,240 --> 00:23:11,960 Speaker 8: going to start marketing about sports injury because it's difficult 474 00:23:12,000 --> 00:23:14,399 Speaker 8: for one person to sit there and examine each and 475 00:23:14,440 --> 00:23:18,800 Speaker 8: every commercial, each and every posted ad, everything, but a 476 00:23:18,800 --> 00:23:21,040 Speaker 8: machine can do it. Leakidy split all right. 477 00:23:21,080 --> 00:23:24,119 Speaker 2: So AI was once again in the forefront of some 478 00:23:24,160 --> 00:23:27,159 Speaker 2: of the Hollywood strike issues between the writers and the 479 00:23:27,160 --> 00:23:30,200 Speaker 2: studios and the actors in the studios. And I guess 480 00:23:30,200 --> 00:23:33,440 Speaker 2: there's new language in those agreements, and is what language 481 00:23:33,480 --> 00:23:36,760 Speaker 2: was incorporated in there to kind of give protection vis 482 00:23:36,760 --> 00:23:37,400 Speaker 2: a VAI. 483 00:23:38,040 --> 00:23:42,040 Speaker 8: Well, I think that they're both winners and losers with 484 00:23:42,440 --> 00:23:45,160 Speaker 8: the provisions that are in their contract now. So one 485 00:23:45,200 --> 00:23:47,400 Speaker 8: thing that's a win for the actors is that if 486 00:23:47,440 --> 00:23:50,800 Speaker 8: you use AI to create a fake Ranya, for example, 487 00:23:51,359 --> 00:23:53,439 Speaker 8: I still get paid even though I may not have 488 00:23:53,480 --> 00:23:56,280 Speaker 8: worked on it. Because you're using my likeness. Everyone thinks 489 00:23:56,320 --> 00:23:58,640 Speaker 8: it's me, so I'm going to get paid. That's certainly 490 00:23:58,920 --> 00:24:04,440 Speaker 8: a win. The producers are permitted to create synthetic characters 491 00:24:04,440 --> 00:24:09,359 Speaker 8: that may not look like anyone you recognize, and no 492 00:24:09,400 --> 00:24:12,080 Speaker 8: one gets paid for that. They can also make a 493 00:24:12,119 --> 00:24:14,840 Speaker 8: double of me and use it for satire, So think 494 00:24:14,880 --> 00:24:17,480 Speaker 8: of I'm going to date myself again. We'd al Yankovic 495 00:24:17,960 --> 00:24:21,040 Speaker 8: all right, what he was doing, like a surgeon or whatever. 496 00:24:21,440 --> 00:24:23,720 Speaker 8: So you can use it for parody. You can use 497 00:24:23,760 --> 00:24:25,639 Speaker 8: a double of me or anyone else for parody, and 498 00:24:25,680 --> 00:24:29,200 Speaker 8: you can use it for some kind of biographical data, 499 00:24:29,760 --> 00:24:32,000 Speaker 8: and the actors won't get paid for that. So there 500 00:24:32,040 --> 00:24:34,680 Speaker 8: are some winners, but there are also some losers. And 501 00:24:35,280 --> 00:24:39,840 Speaker 8: there's a wide availability of new characters out there. If 502 00:24:39,840 --> 00:24:42,800 Speaker 8: we've ever wanted to figure out what a baby would 503 00:24:42,840 --> 00:24:45,040 Speaker 8: look like if it was had two parents that we 504 00:24:45,080 --> 00:24:47,639 Speaker 8: both think are pretty We can create this image in 505 00:24:47,720 --> 00:24:50,040 Speaker 8: AI moving forward. 506 00:24:50,280 --> 00:24:53,440 Speaker 3: How much of an issue is going to be, especially 507 00:24:53,480 --> 00:24:57,080 Speaker 3: for marketing if AI still has a lot of question 508 00:24:57,160 --> 00:24:59,160 Speaker 3: marks surrounding it, and how it's going to be used 509 00:24:59,200 --> 00:25:01,080 Speaker 3: by companies, Well, I think. 510 00:25:00,920 --> 00:25:03,360 Speaker 8: To protect yourself as a company. I mean, that's who 511 00:25:03,359 --> 00:25:06,680 Speaker 8: I'm usually working with as the company. I tell them 512 00:25:06,720 --> 00:25:10,800 Speaker 8: to have review rights in all their contracts. So before 513 00:25:11,000 --> 00:25:15,640 Speaker 8: the agency just posts your advertisement, check it. Make sure 514 00:25:15,680 --> 00:25:18,000 Speaker 8: it sounds like you, or if it doesn't, you like 515 00:25:18,160 --> 00:25:22,399 Speaker 8: the new sound, and make sure that whatever is stated 516 00:25:22,480 --> 00:25:26,880 Speaker 8: is factual. Because there's sales puffery and then there's misrepresentation, 517 00:25:26,960 --> 00:25:28,920 Speaker 8: and it's a very fine line, and then. 518 00:25:28,840 --> 00:25:31,240 Speaker 3: The Hollywood strikes. As far as what that means for 519 00:25:31,400 --> 00:25:33,040 Speaker 3: potential jobs, talk to us. 520 00:25:33,000 --> 00:25:37,600 Speaker 8: About that, well, I think what can happen. What I 521 00:25:37,640 --> 00:25:41,240 Speaker 8: do see happening is if some stars either want to 522 00:25:41,240 --> 00:25:44,440 Speaker 8: make too much whatever that means, or they have attitudes 523 00:25:44,480 --> 00:25:47,439 Speaker 8: that the producers or directors don't like, they'll just create 524 00:25:47,600 --> 00:25:51,359 Speaker 8: a synthetic character that doesn't look like them or anyone else, 525 00:25:52,000 --> 00:25:54,600 Speaker 8: and then they just pluck them out. 526 00:25:54,800 --> 00:25:57,560 Speaker 2: All right, let's switch gears. Let's talk another New York 527 00:25:57,640 --> 00:26:02,560 Speaker 2: specific issue, which non compete agreements, which are in financial 528 00:26:02,640 --> 00:26:04,959 Speaker 2: services industry here in New York and the legal industry 529 00:26:04,960 --> 00:26:08,439 Speaker 2: in New York, lots of them really prevalent. What's the 530 00:26:08,480 --> 00:26:10,280 Speaker 2: status of non competes in New York. 531 00:26:10,480 --> 00:26:17,040 Speaker 8: Well, Kathy Hockel just last week rejected the bills as 532 00:26:17,080 --> 00:26:19,399 Speaker 8: given to her. And this was a bill to This 533 00:26:19,600 --> 00:26:21,960 Speaker 8: was a bill that says all non competes in New 534 00:26:22,080 --> 00:26:25,879 Speaker 8: York will be prohibited. And she said, no, that's not 535 00:26:25,920 --> 00:26:29,000 Speaker 8: going to help businesses out. And she has until December 536 00:26:29,000 --> 00:26:32,000 Speaker 8: thirty first of this year to redline it. Maybe she's 537 00:26:32,040 --> 00:26:35,560 Speaker 8: going to add some limitations to it. One limitation I've 538 00:26:35,600 --> 00:26:39,080 Speaker 8: been listening to is if someone is making more than 539 00:26:39,080 --> 00:26:42,080 Speaker 8: two hundred and fifty thousand dollars, you can enforce a 540 00:26:42,080 --> 00:26:45,680 Speaker 8: non compete. Otherwise maybe not. So we're going to wait 541 00:26:45,720 --> 00:26:47,119 Speaker 8: and see the power of the pen and how she 542 00:26:47,200 --> 00:26:48,440 Speaker 8: uses it until the end of the year. 543 00:26:48,960 --> 00:26:51,520 Speaker 2: How important is this to like, what's the business community 544 00:26:52,000 --> 00:26:53,159 Speaker 2: in New York saying. 545 00:26:53,160 --> 00:26:55,800 Speaker 8: Well, everyone is frightened. I mean, think about it. If 546 00:26:56,080 --> 00:26:59,520 Speaker 8: I purchase your company and then tomorrow you can open 547 00:26:59,600 --> 00:27:03,159 Speaker 8: up another company and tell all your previous customers, who 548 00:27:03,240 --> 00:27:05,520 Speaker 8: I just thought were going to be my customers, that 549 00:27:05,560 --> 00:27:07,560 Speaker 8: you're doing the same thing under a new name. 550 00:27:07,640 --> 00:27:14,320 Speaker 2: So who's backing the passage of this just labor groups? Yes, okay, 551 00:27:14,480 --> 00:27:16,480 Speaker 2: so this is a question just I mean, this is 552 00:27:16,520 --> 00:27:18,440 Speaker 2: kind of a new issue, but it's you're either pro 553 00:27:18,520 --> 00:27:22,080 Speaker 2: business or your pro labor. It's at its basic fundamental level. 554 00:27:22,119 --> 00:27:22,480 Speaker 2: I guess. 555 00:27:22,560 --> 00:27:26,600 Speaker 8: Well, I think that's what we're seeing across the United States, 556 00:27:26,680 --> 00:27:29,359 Speaker 8: either your four or again something and the world is 557 00:27:29,440 --> 00:27:32,399 Speaker 8: very nuanced and it's a difficult position to be in 558 00:27:32,640 --> 00:27:34,119 Speaker 8: to always just say yes or no. 559 00:27:34,880 --> 00:27:38,280 Speaker 2: So again, we'll hear from Governor Hokel by the end 560 00:27:38,480 --> 00:27:40,080 Speaker 2: of December, or is that the plan? 561 00:27:40,359 --> 00:27:43,359 Speaker 8: Maybe if she does not make any changes, then it'll 562 00:27:43,440 --> 00:27:49,679 Speaker 8: just disappear. However, President Biden has something similar in the 563 00:27:49,720 --> 00:27:53,080 Speaker 8: works on a federal basis, so it may be irrelevant soon. 564 00:27:53,920 --> 00:27:57,119 Speaker 2: Interesting, Okay, lots out there. That's why we talk to 565 00:27:57,160 --> 00:27:59,680 Speaker 2: people like you, Rania set Home, she's a managing partner 566 00:28:00,080 --> 00:28:03,320 Speaker 2: set Home a law group, talking about AI and it's 567 00:28:03,359 --> 00:28:06,159 Speaker 2: impact on a lot of businesses, including marketing and advertising 568 00:28:06,160 --> 00:28:08,440 Speaker 2: and all that kind of stuff. And then just more 569 00:28:08,480 --> 00:28:12,479 Speaker 2: broadly find on the on the employment front, just non compete. 570 00:28:12,480 --> 00:28:14,679 Speaker 2: It seems like non competes have been around forever. 571 00:28:14,840 --> 00:28:17,120 Speaker 3: They have been, especially in financial services. 572 00:28:17,240 --> 00:28:19,480 Speaker 2: Yeah, exactly, garden leaf. I mean, you know how many 573 00:28:19,480 --> 00:28:22,880 Speaker 2: people have taken up a new skill just by playing 574 00:28:22,920 --> 00:28:25,080 Speaker 2: out playing with their garden leave a little bit s 575 00:28:25,119 --> 00:28:28,400 Speaker 2: and P five hundred off six tenths of one percent 576 00:28:28,840 --> 00:28:30,359 Speaker 2: here in the market. So we got a little bit 577 00:28:30,359 --> 00:28:33,280 Speaker 2: of solve, but that was after I guess five weeks 578 00:28:33,760 --> 00:28:35,040 Speaker 2: of big time performance. 579 00:28:36,400 --> 00:28:39,520 Speaker 4: You're listening to the tape cans are live program Bloomberg 580 00:28:39,600 --> 00:28:43,200 Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the 581 00:28:43,240 --> 00:28:46,480 Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 582 00:28:46,520 --> 00:28:49,320 Speaker 4: You can also listen live on Amazon Alexa from our 583 00:28:49,360 --> 00:28:54,560 Speaker 4: flagship New York station, just say Alexa playing Bloomberg eleven thirty. 584 00:28:54,160 --> 00:28:58,840 Speaker 2: There's a little place out west called California. They have 585 00:28:58,840 --> 00:29:03,080 Speaker 2: a lot of teachers they do California and they taught 586 00:29:03,080 --> 00:29:05,880 Speaker 2: My youngest son actually graduated from my California high school. 587 00:29:06,280 --> 00:29:10,240 Speaker 2: And those folks say for retirement, somebody's got to manage 588 00:29:10,480 --> 00:29:10,880 Speaker 2: that money. 589 00:29:10,920 --> 00:29:11,440 Speaker 3: It's a lot of word. 590 00:29:12,480 --> 00:29:14,480 Speaker 2: Our next guest is that does that Chris Allman, he's 591 00:29:14,480 --> 00:29:18,480 Speaker 2: the CIO of Cowster's California State Teachers Retirement System, got 592 00:29:18,480 --> 00:29:20,400 Speaker 2: a little lost between the sixth and fifth Florida. We 593 00:29:20,440 --> 00:29:24,160 Speaker 2: found you, Chris. That was a heck of a November 594 00:29:24,440 --> 00:29:26,560 Speaker 2: for these markets. What happened there? 595 00:29:26,680 --> 00:29:33,080 Speaker 5: That was the soft landing. The soft landing rates are done? 596 00:29:33,280 --> 00:29:35,000 Speaker 2: You know, do we see peak rates? Do you think 597 00:29:35,000 --> 00:29:35,880 Speaker 2: we saw peak rates? 598 00:29:36,640 --> 00:29:39,160 Speaker 9: Maybe twenty five just for but I know we've hit 599 00:29:39,200 --> 00:29:41,560 Speaker 9: peak grades. Oh yeah, But I don't think they need 600 00:29:41,560 --> 00:29:44,160 Speaker 9: to ease anytime soon because that would imply a recession. 601 00:29:44,840 --> 00:29:48,320 Speaker 9: They'll gradually step down, but the streets ahead of itself, 602 00:29:48,360 --> 00:29:51,000 Speaker 9: and I think November was the signal that was a 603 00:29:51,080 --> 00:29:51,719 Speaker 9: soft landing. 604 00:29:52,360 --> 00:29:54,920 Speaker 3: So how do you view markets heading into year end? 605 00:29:55,000 --> 00:29:57,200 Speaker 3: And what's your outlook for twenty twenty four as far 606 00:29:57,240 --> 00:29:59,480 Speaker 3: as when we're talking about that soft landing scenario. 607 00:30:00,040 --> 00:30:02,400 Speaker 9: Yeah, that's the interesting question is I don't think anybody's 608 00:30:02,400 --> 00:30:06,560 Speaker 9: happy about this soft landing and very worried because normally 609 00:30:06,640 --> 00:30:08,400 Speaker 9: you would think that that means the economy is going 610 00:30:08,440 --> 00:30:10,920 Speaker 9: to take off, but you don't get that sense. We 611 00:30:11,040 --> 00:30:13,280 Speaker 9: had a bit of a merger Monday, so maybe the 612 00:30:13,320 --> 00:30:17,280 Speaker 9: market's coming back that way, but cautious and absolutely neutral 613 00:30:17,320 --> 00:30:19,280 Speaker 9: on the asset classes. We're not going to take a 614 00:30:19,320 --> 00:30:22,440 Speaker 9: bet fixed in comes back. There's no bonds are back, 615 00:30:22,520 --> 00:30:25,560 Speaker 9: so you can buy and hold. I wouldn't trade, but 616 00:30:26,120 --> 00:30:28,640 Speaker 9: private credit, there's just not a lot of opportunities. Everything's 617 00:30:28,640 --> 00:30:29,400 Speaker 9: priced to perfection. 618 00:30:29,600 --> 00:30:32,920 Speaker 3: It's interesting because there still is a lot of pessimism 619 00:30:33,000 --> 00:30:36,520 Speaker 3: out there from a sentiment standpoint, and when you square 620 00:30:36,560 --> 00:30:38,520 Speaker 3: that away with a lot of the consumer spinning data 621 00:30:38,560 --> 00:30:41,400 Speaker 3: that's still really strong. What is it that's really pushing 622 00:30:41,440 --> 00:30:44,080 Speaker 3: people who have a call going into next year thinking 623 00:30:44,120 --> 00:30:47,600 Speaker 3: that the economy is going to substantially slow. What is 624 00:30:47,640 --> 00:30:48,720 Speaker 3: going to be the catalyst? 625 00:30:49,280 --> 00:30:51,600 Speaker 9: You know, that's a tough question because I've been predicting 626 00:30:51,600 --> 00:30:53,080 Speaker 9: a recession for sixteen months. 627 00:30:53,160 --> 00:30:58,000 Speaker 5: So I've been wrong the whole time. And I think are. 628 00:30:57,600 --> 00:30:59,680 Speaker 3: Also in that camp and who have not admitted that 629 00:30:59,720 --> 00:31:00,000 Speaker 3: they are. 630 00:31:00,440 --> 00:31:00,680 Speaker 7: No. 631 00:31:00,680 --> 00:31:01,840 Speaker 5: No, I'll fess up. 632 00:31:01,880 --> 00:31:04,400 Speaker 9: I've been wrong a lot in my career. It happens, 633 00:31:05,120 --> 00:31:07,920 Speaker 9: So I don't know what would cause that catalyst. I 634 00:31:07,960 --> 00:31:10,520 Speaker 9: think the lower end consumer is running out of money. 635 00:31:10,520 --> 00:31:12,320 Speaker 9: When you have a weakness out of Walmart, out of 636 00:31:12,360 --> 00:31:16,800 Speaker 9: dollar store, Sprint, Airlines, Frontier, having a few open seats. 637 00:31:16,920 --> 00:31:20,080 Speaker 9: Maybe they're going to spend at Christmas, they're going to overextend, 638 00:31:20,120 --> 00:31:21,960 Speaker 9: and so maybe we have a bit of a debt 639 00:31:22,000 --> 00:31:25,400 Speaker 9: hangover in January February. That's where we feel it. I'm 640 00:31:25,400 --> 00:31:28,160 Speaker 9: getting nervous because you still see like Spotify today, you 641 00:31:28,240 --> 00:31:32,800 Speaker 9: still see layoff notices and reductions. We'll wait to see 642 00:31:32,800 --> 00:31:35,959 Speaker 9: the employment numbers on Friday. They have been surprising us 643 00:31:36,000 --> 00:31:39,840 Speaker 9: on the upside. So this is also called muddling along, 644 00:31:39,920 --> 00:31:43,360 Speaker 9: and I think in a large extent that's what twenty 645 00:31:43,400 --> 00:31:45,120 Speaker 9: three was about and twenty four will be about. 646 00:31:45,440 --> 00:31:47,520 Speaker 2: All Right, You've been doing this a long time here. 647 00:31:47,640 --> 00:31:49,640 Speaker 2: I'm not commenting on his age. I'm just saying you've 648 00:31:49,640 --> 00:31:52,680 Speaker 2: been around this a few times. When you see a 649 00:31:52,720 --> 00:31:55,200 Speaker 2: stock market up eighteen nineteen percent, what are the smp 650 00:31:55,320 --> 00:31:57,800 Speaker 2: is here? But when you back out six seven names 651 00:31:57,840 --> 00:32:00,760 Speaker 2: and it's basically got four or five percent, what does 652 00:32:00,760 --> 00:32:01,240 Speaker 2: that tell you? 653 00:32:01,600 --> 00:32:04,360 Speaker 9: Whorries the heck outomy? I listen to you guys every day, 654 00:32:04,480 --> 00:32:06,560 Speaker 9: So just a plug, I really do. I listen to 655 00:32:06,560 --> 00:32:09,440 Speaker 9: you every day driving into work California. 656 00:32:09,520 --> 00:32:09,960 Speaker 2: Times. 657 00:32:10,560 --> 00:32:12,120 Speaker 5: You've been around along as I've been around. 658 00:32:13,960 --> 00:32:16,640 Speaker 9: I will just say that they that no that always 659 00:32:16,680 --> 00:32:19,400 Speaker 9: causes for concern because we've seen that before in some 660 00:32:19,480 --> 00:32:24,720 Speaker 9: technology names, and this is so extreme with that magnificent seven. 661 00:32:24,880 --> 00:32:27,480 Speaker 9: So it's not healthy breadth in the market. I think 662 00:32:27,600 --> 00:32:30,720 Speaker 9: that's another downside. Jess As you said, what would cause 663 00:32:30,760 --> 00:32:33,520 Speaker 9: the market to down turn down? I think it's a 664 00:32:33,600 --> 00:32:36,960 Speaker 9: high inflation number or an up to inflation, a worry 665 00:32:37,000 --> 00:32:40,720 Speaker 9: about employment, and then everybody resettles their expectations. 666 00:32:41,080 --> 00:32:43,680 Speaker 3: Gina Martin Adams have to bring her up, who over 667 00:32:43,720 --> 00:32:47,200 Speaker 3: at Bloomberg Intelligence, who leads the equity side. She and 668 00:32:47,280 --> 00:32:49,920 Speaker 3: her team did research on the concentration when you are looking, 669 00:32:50,000 --> 00:32:53,640 Speaker 3: especially with megacap TAC and even when there is heavy concentration, 670 00:32:53,720 --> 00:32:58,080 Speaker 3: there's still time to make money between that concentration and 671 00:32:58,160 --> 00:33:00,280 Speaker 3: when obviously there could be a flip and leadership. But 672 00:33:00,640 --> 00:33:03,160 Speaker 3: from your point of view, I mean, is there still 673 00:33:03,160 --> 00:33:05,520 Speaker 3: time where people will lose out if they're too concerned 674 00:33:05,560 --> 00:33:07,880 Speaker 3: for too long, Well, they end up losing out on 675 00:33:08,360 --> 00:33:11,000 Speaker 3: making money. I'm concerned about. 676 00:33:11,200 --> 00:33:12,400 Speaker 5: To concern for too long. 677 00:33:12,480 --> 00:33:14,600 Speaker 9: Compt My staff will tell you I've been a permanent 678 00:33:14,640 --> 00:33:18,080 Speaker 9: bear through all of this and it's not worked. Paul, 679 00:33:18,120 --> 00:33:22,440 Speaker 9: I thought a global pandemic was a bad thing. But 680 00:33:22,520 --> 00:33:24,480 Speaker 9: I've found out now in my career it's a good thing. 681 00:33:24,600 --> 00:33:27,800 Speaker 9: So I have been a bear and that has not 682 00:33:27,880 --> 00:33:31,240 Speaker 9: been the place to be. We're neutral on our equity 683 00:33:31,280 --> 00:33:35,720 Speaker 9: waiting and we have been over this sixteen month bear 684 00:33:35,800 --> 00:33:39,400 Speaker 9: market prediction and recession prediction because it's too expensive to 685 00:33:39,440 --> 00:33:41,959 Speaker 9: be out. So I think you have to be fully invested. 686 00:33:42,040 --> 00:33:44,320 Speaker 9: You have to pay attention to asset allocation again. 687 00:33:44,080 --> 00:33:44,960 Speaker 5: And be balanced. 688 00:33:45,000 --> 00:33:47,480 Speaker 9: You can't just be in the magnificent seven. 689 00:33:47,960 --> 00:33:50,400 Speaker 3: Nobody realzed what are you advising clients. 690 00:33:51,360 --> 00:33:53,680 Speaker 9: I've been telling people pay attention to fixed income again. 691 00:33:53,760 --> 00:33:56,760 Speaker 9: It's back rates are up, It's at a decent place 692 00:33:56,800 --> 00:33:57,400 Speaker 9: to invest. 693 00:33:58,320 --> 00:34:00,400 Speaker 5: You know, we're not putting new money to work in 694 00:34:00,400 --> 00:34:00,880 Speaker 5: real estate. 695 00:34:00,920 --> 00:34:03,440 Speaker 9: Are in private equity at these levels, just to steady 696 00:34:03,440 --> 00:34:06,960 Speaker 9: investor in private equity, but really private credit, it's hard 697 00:34:06,960 --> 00:34:09,800 Speaker 9: to find opportunities again because the fren credit. 698 00:34:10,280 --> 00:34:11,840 Speaker 3: Paul's very private credit. 699 00:34:12,200 --> 00:34:15,400 Speaker 9: Well, you know, variable rate returns, You've got to do 700 00:34:15,480 --> 00:34:18,959 Speaker 9: your homework, You've got to look at your credit and analysis. Absolutely, 701 00:34:19,480 --> 00:34:21,600 Speaker 9: But that's been a very nice place to be because 702 00:34:21,600 --> 00:34:23,239 Speaker 9: the banks are out, so a lot of the big 703 00:34:23,280 --> 00:34:26,520 Speaker 9: pinsion plans. The Maple Layton, Canada, are investing in that area. 704 00:34:26,680 --> 00:34:29,600 Speaker 2: So what is it for cowsters? A typical asset allocation? 705 00:34:30,400 --> 00:34:33,600 Speaker 2: You know, equities, fixed income, alternates, what's typically been your model. 706 00:34:34,200 --> 00:34:36,399 Speaker 9: You know, we've adjusted it over time. We're going back 707 00:34:36,400 --> 00:34:38,600 Speaker 9: into fixed income. Our fixed income got all the way 708 00:34:38,600 --> 00:34:41,720 Speaker 9: down to twelve percent. We're going to oh yeah, because 709 00:34:41,800 --> 00:34:44,440 Speaker 9: there was just no return out of fixed income. So 710 00:34:44,800 --> 00:34:47,800 Speaker 9: you know, equities for a long time was over fifty percent. 711 00:34:47,880 --> 00:34:51,239 Speaker 9: That's coming down a little bit into the forties. We're 712 00:34:51,239 --> 00:34:54,759 Speaker 9: going to go to fifteen in fixed income. But we're 713 00:34:54,800 --> 00:34:59,160 Speaker 9: also heavily invested fifteen in real estate, fifteen in private equity. 714 00:34:59,480 --> 00:35:03,480 Speaker 9: We've got some inflation sensitive assets, and we have another 715 00:35:03,520 --> 00:35:07,400 Speaker 9: category we call risk mitigating strategies, a bucket of things 716 00:35:07,719 --> 00:35:11,840 Speaker 9: publics and privates that diversify the portfolio. So if you 717 00:35:11,880 --> 00:35:14,520 Speaker 9: go back to the big picture, we're eighty twenty and 718 00:35:14,520 --> 00:35:17,200 Speaker 9: we always have been. It's just the subcomponents have changed 719 00:35:17,200 --> 00:35:17,600 Speaker 9: over time. 720 00:35:17,640 --> 00:35:20,120 Speaker 2: How concerned are you about this private credit business, because 721 00:35:20,160 --> 00:35:22,600 Speaker 2: it just feels like we're one or two big blow 722 00:35:22,640 --> 00:35:25,960 Speaker 2: ups away from everybody's eyes going to private credit saying, 723 00:35:26,000 --> 00:35:28,719 Speaker 2: oh my goodness, how much capital do these people have 724 00:35:28,840 --> 00:35:31,520 Speaker 2: over there? I just feel like there's no really anybody 725 00:35:31,760 --> 00:35:33,640 Speaker 2: kind of the wild West. Nobody's really looking at it. 726 00:35:33,960 --> 00:35:36,200 Speaker 5: I hear you. I think that, and you will. 727 00:35:36,520 --> 00:35:38,879 Speaker 9: If you have a recession, you'll have some blow ups 728 00:35:38,880 --> 00:35:42,600 Speaker 9: and credit because people didn't do their homework. Covenant light 729 00:35:42,680 --> 00:35:45,920 Speaker 9: will come back as a real concern paying attention. Credit 730 00:35:45,960 --> 00:35:49,759 Speaker 9: work has always been about the underlying credit, the due 731 00:35:49,800 --> 00:35:52,920 Speaker 9: diligence on the construction of the loan. That all still 732 00:35:52,960 --> 00:35:56,640 Speaker 9: matters and always has. The big banks have stepped away 733 00:35:56,640 --> 00:35:58,960 Speaker 9: from that middle market lending, and that's why we've been 734 00:35:58,960 --> 00:36:02,480 Speaker 9: able to come in. Yes, you're now seeing this wave 735 00:36:02,560 --> 00:36:04,959 Speaker 9: of capital going in, but it's been going in place 736 00:36:05,000 --> 00:36:07,879 Speaker 9: for about four to five years. It's not brand new, 737 00:36:07,920 --> 00:36:11,319 Speaker 9: it's just using that term as more recent. I think 738 00:36:11,360 --> 00:36:13,680 Speaker 9: it's going to be an investable area, but it will 739 00:36:13,719 --> 00:36:16,240 Speaker 9: always have its stories. You're gonna have your Silicon valley 740 00:36:16,239 --> 00:36:17,960 Speaker 9: banks and your first reserves. 741 00:36:17,960 --> 00:36:19,160 Speaker 5: That's just natural life. 742 00:36:19,480 --> 00:36:24,960 Speaker 3: So no red flags brewing in private credit from your purview. 743 00:36:24,880 --> 00:36:27,160 Speaker 9: I don't think so, because you know, spreads are tight, 744 00:36:27,320 --> 00:36:29,239 Speaker 9: so that's a concern, But spreads are tight in the 745 00:36:29,239 --> 00:36:32,359 Speaker 9: corporate bond market. But no, I don't think it needs 746 00:36:32,400 --> 00:36:35,360 Speaker 9: added regulation, and I think people. I will just constantly 747 00:36:35,400 --> 00:36:38,480 Speaker 9: caution people, do your homework on your credit analysis. Don't 748 00:36:38,520 --> 00:36:41,440 Speaker 9: loan money to people who can't pay it back. Ultimately 749 00:36:41,480 --> 00:36:42,319 Speaker 9: they won't. 750 00:36:43,040 --> 00:36:45,160 Speaker 2: California, how's the economy out there? 751 00:36:45,719 --> 00:36:49,080 Speaker 5: You know, very mixed. People don't like an inflations. 752 00:36:49,160 --> 00:36:50,000 Speaker 2: That's a big state. 753 00:36:50,120 --> 00:36:51,160 Speaker 5: Oh yeah, very diverse. 754 00:36:51,640 --> 00:36:54,120 Speaker 9: Well, and you guys, you know, San Francisco is in 755 00:36:54,120 --> 00:36:57,640 Speaker 9: the spotlight with APAC not as bad as some people 756 00:36:57,680 --> 00:36:59,760 Speaker 9: made it out. All the big cities are having trouble 757 00:36:59,760 --> 00:37:05,200 Speaker 9: with homelessness. Southern California is doing okay. We get hit 758 00:37:05,200 --> 00:37:08,759 Speaker 9: by higher fuel prices and higher energy prices, and I 759 00:37:08,760 --> 00:37:11,719 Speaker 9: think we're going to be continually impacted by climate change 760 00:37:11,719 --> 00:37:14,840 Speaker 9: and people aren't paying enough attention to that. Stronger storms, 761 00:37:15,000 --> 00:37:15,720 Speaker 9: aberate weather. 762 00:37:16,560 --> 00:37:18,960 Speaker 2: How do you incorporate that? Because we have a like 763 00:37:19,000 --> 00:37:21,719 Speaker 2: everywhere else, we have a big ESG focus at Bloomberg. 764 00:37:21,760 --> 00:37:23,960 Speaker 2: We allocate a lot of resources to it. But it's 765 00:37:24,000 --> 00:37:26,239 Speaker 2: become politicized in the US, and I kind of feel 766 00:37:26,280 --> 00:37:29,240 Speaker 2: like it's losing some of its time in the spotlight, 767 00:37:29,239 --> 00:37:31,120 Speaker 2: at least here in US. I know it's different in Europe. 768 00:37:31,120 --> 00:37:34,520 Speaker 2: How does ESG go into your investment process? 769 00:37:34,760 --> 00:37:38,719 Speaker 9: Absolutely integrained ingrained into everything we do. It's part of 770 00:37:38,719 --> 00:37:41,319 Speaker 9: our core and our center. Larry Fink said he won't 771 00:37:41,400 --> 00:37:44,800 Speaker 9: use the letters E, S and G. That's become politicized. 772 00:37:45,200 --> 00:37:51,399 Speaker 9: The idea of governance risks, environmental risk, employment, social risks 773 00:37:51,440 --> 00:37:54,759 Speaker 9: still matter, and they're just part of long term investment risk. 774 00:37:55,000 --> 00:37:57,000 Speaker 9: And so I think we've got to get away from 775 00:37:57,000 --> 00:37:59,920 Speaker 9: the initials and the political side and really focus in 776 00:38:00,160 --> 00:38:03,680 Speaker 9: on long term business risks, which absolutely matter. CEOs pay 777 00:38:03,719 --> 00:38:05,920 Speaker 9: attention to this, they just don't use those initials. 778 00:38:05,960 --> 00:38:07,600 Speaker 2: Just real quick twenty seconds. Do you think there's a 779 00:38:07,640 --> 00:38:11,799 Speaker 2: positive correlation between climate change in your investment process and returns? 780 00:38:12,239 --> 00:38:14,239 Speaker 9: I think there will be over time. I think it 781 00:38:14,320 --> 00:38:16,440 Speaker 9: is the biggest mega trend, Paul, that we're going to 782 00:38:16,480 --> 00:38:18,880 Speaker 9: see in the next ten years. It is absolutely going 783 00:38:18,920 --> 00:38:21,640 Speaker 9: to dominate the investment lands safe we have to go 784 00:38:21,719 --> 00:38:23,680 Speaker 9: through a huge energy transition. 785 00:38:23,920 --> 00:38:25,920 Speaker 2: I would love to be at a table. Maybe I'll 786 00:38:25,920 --> 00:38:28,640 Speaker 2: get this dinner, him saying his kind of part in 787 00:38:28,680 --> 00:38:30,880 Speaker 2: Texas is kind of part in Florida. 788 00:38:31,360 --> 00:38:33,840 Speaker 5: Hey, I talked to Jason Alby Texas. 789 00:38:34,280 --> 00:38:37,640 Speaker 9: Good friends with Florida. Let me hit your tea time 790 00:38:37,680 --> 00:38:38,480 Speaker 9: on Freddy. 791 00:38:38,200 --> 00:38:40,200 Speaker 2: Exactly, very good chrisy Almen, thank you so much for 792 00:38:40,280 --> 00:38:41,480 Speaker 2: Journey's really appreciate it. 793 00:38:44,120 --> 00:38:47,239 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 794 00:38:47,239 --> 00:38:51,040 Speaker 1: subscribe and listen to interviews in Apple Podcasts or whatever 795 00:38:51,120 --> 00:38:54,840 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 796 00:38:55,040 --> 00:38:58,280 Speaker 1: at Matt Miller nineteen seventy three, and I'm Fall Sweeney. 797 00:38:58,320 --> 00:39:00,920 Speaker 2: I'm on Twitter at pt Sweeney for the podcast. You 798 00:39:00,960 --> 00:39:03,359 Speaker 2: can always catch us worldwide at Bloomberg Radio