WEBVTT - Bloomberg Invest 2023 (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.640 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.480 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.400 --> 0:00:23.919 We are going to continue to monitor markets throughout the 0:00:24.000 --> 0:00:27.400 day here, of course, but right now we have a 0:00:27.520 --> 0:00:30.000 very special guest with us here in New York City. 0:00:30.000 --> 0:00:33.120 We've got Kristin Olsen. She's a partner of Alternative capital 0:00:33.159 --> 0:00:37.040 Markets at Goldman Sachs. She's here to discuss investing strategies 0:00:37.040 --> 0:00:40.000 and give us her outlook for alternative markets. She was 0:00:40.040 --> 0:00:42.440 also in a great panel this morning that was far 0:00:42.520 --> 0:00:45.400 too short about positioning for a recession, so we're gonna 0:00:45.520 --> 0:00:47.839 get some more time with her. Thankfully, Kristen, thank you 0:00:47.880 --> 0:00:51.840 for being here with us in person. I imagine that all 0:00:52.040 --> 0:00:54.680 capital markets are very attractive right now as we're in 0:00:54.720 --> 0:00:56.280 this recessionary environment. 0:00:56.360 --> 0:00:56.960 Can you talk to me. 0:00:56.960 --> 0:00:58.760 About what business is looking like for you? 0:00:59.000 --> 0:00:59.280 Sure? 0:01:00.080 --> 0:01:04.320 Well, I would say clients are increasingly upping their allocations alternative. 0:01:04.319 --> 0:01:07.880 So we've always had a very big strategic weight towards 0:01:07.880 --> 0:01:10.440 alternative investments. And I think what our clients have seen 0:01:10.640 --> 0:01:14.319 over the past twenty five years is the private markets 0:01:14.319 --> 0:01:17.720 have generated real alpha versus the public markets, and they've 0:01:17.720 --> 0:01:21.880 seen it with less perceived volatility and correlation to traditional markets. 0:01:22.520 --> 0:01:25.880 And so obviously that's attractive right now. I think when 0:01:25.920 --> 0:01:28.040 people are looking under the hood at where an alternatives, 0:01:28.080 --> 0:01:32.800 they focused traditional private equity. In this market, secondary private 0:01:32.800 --> 0:01:37.840 equity is particularly compelling. Obviously, liquidity is at a premium, 0:01:38.120 --> 0:01:40.760 and so the opportunity to buy private equity at a 0:01:40.800 --> 0:01:44.679 discount is pretty compelling right now. And then in this 0:01:44.800 --> 0:01:48.120 environment private credit, the ability to be top of the 0:01:48.160 --> 0:01:52.200 capital structure and in this market yet double digit un 0:01:52.240 --> 0:01:54.680 levered returns is very very compelling. 0:01:55.560 --> 0:01:58.560 Christian, I'm down here in Orlando, Florida today at the 0:01:58.600 --> 0:02:01.240 B and Y Melon Persihing Insight Conference, and what we've 0:02:01.240 --> 0:02:05.280 heard of yours, retail investors really have an appetite for 0:02:05.520 --> 0:02:06.720 alternative investments. 0:02:06.920 --> 0:02:09.919 How do you view that source of wealth, that pool 0:02:09.919 --> 0:02:10.440 of capital. 0:02:11.160 --> 0:02:14.920 Certainly we see that as a very big growth opportunity. 0:02:15.360 --> 0:02:18.240 I think that market and those investors have not has 0:02:18.480 --> 0:02:21.840 had as many opportunities to get into alternatives. And what 0:02:21.840 --> 0:02:24.280 we're seeing over the last couple of years or some 0:02:24.360 --> 0:02:28.200 new opportunities in private credit, in particular with the advent 0:02:28.240 --> 0:02:30.960 of a number of these non traded BDCs that provide 0:02:31.360 --> 0:02:36.079 quarterly yield and access to this type of private credit market. Similarly, 0:02:36.080 --> 0:02:39.120 we've seen the private real estate side non traded wreaths, 0:02:39.720 --> 0:02:41.840 and both of those are structured to accommodate a broader 0:02:41.960 --> 0:02:46.240 universe of investors than traditional alternatives are available to. And 0:02:46.280 --> 0:02:47.799 then I think the next question will be how does 0:02:47.840 --> 0:02:52.680 that investor based access private equity and what structures will 0:02:52.680 --> 0:02:54.200 become available in that space. 0:02:54.800 --> 0:02:58.000 Within reads which is so interesting that you bring up 0:02:58.040 --> 0:02:59.480 Can you talk to me a little bit more about 0:02:59.520 --> 0:03:01.440 that and what clients are interested in. 0:03:02.240 --> 0:03:05.160 So from from my client base, they're looking more at 0:03:05.240 --> 0:03:08.400 the and this is on the private well side, ultrahigh 0:03:08.440 --> 0:03:10.760 net worth and if we even go down to kind 0:03:10.800 --> 0:03:14.240 of mass affluent, it's more of the private rate market 0:03:14.320 --> 0:03:17.400 as opposed to the public rate market. But you know, 0:03:17.400 --> 0:03:20.400 I think there's some hesitancy right now. You know, those 0:03:21.120 --> 0:03:25.080 investments have a fixed yield in an environment where private 0:03:25.120 --> 0:03:27.839 credit with floating rate, floating yields are probably a little 0:03:27.880 --> 0:03:30.960 bit more attractive, and I think there's a little bit 0:03:30.960 --> 0:03:33.120 of a wait and see as where do the real 0:03:33.200 --> 0:03:36.440 estate values for existing pools of assets shake out, and 0:03:36.480 --> 0:03:38.760 probably some concerns in the near term about where evaluations 0:03:38.760 --> 0:03:39.119 are going. 0:03:40.160 --> 0:03:43.400 So Christian, you mentioned earlier private credit, and that's a 0:03:43.400 --> 0:03:44.920 business that I think if I were to come back 0:03:44.960 --> 0:03:47.080 again and start my Wall Street career all over again, 0:03:47.160 --> 0:03:49.160 that would be an area that I would look really 0:03:49.200 --> 0:03:51.760 hard at. I'm just amazed at the amount of capital 0:03:52.320 --> 0:03:53.840 flowing to private credit. 0:03:54.040 --> 0:03:55.600 What's your view of that that market? 0:03:56.600 --> 0:03:59.800 We think right now it's quite compelling. Look, obviously, there's 0:03:59.800 --> 0:04:02.400 been a big pivot post the global financial crisis. Right 0:04:02.440 --> 0:04:05.840 banks pulled back significantly from this type of direct lending, 0:04:06.240 --> 0:04:09.320 and alternative credit providers stepped in. So I think you have, 0:04:09.480 --> 0:04:11.440 you know, five times the amount of capital in that 0:04:11.480 --> 0:04:13.400 space then you did back in two thousand and nine. 0:04:14.080 --> 0:04:16.200 And then if you sit here today and you look 0:04:16.240 --> 0:04:18.880 at you know, base rates up five hundred basis points, 0:04:18.920 --> 0:04:22.400 credit spreads widening. If you can pick the right managers 0:04:22.400 --> 0:04:25.640 that can select the right credits. Unlevered yields of ten 0:04:25.640 --> 0:04:30.160 plus percent and levered returns that are low teens, you're 0:04:30.200 --> 0:04:32.760 not that far off from the returns that investors might 0:04:32.800 --> 0:04:36.159 be thinking of for private equity. And so, you know, 0:04:36.200 --> 0:04:39.440 we think that risk return today is very attractive and 0:04:39.480 --> 0:04:42.279 hence you're seeing a lot of capital flow into that space, 0:04:43.680 --> 0:04:45.880 and particularly if we've been in a yield starb environment 0:04:46.040 --> 0:04:47.880 and that yield's pretty attractive today. 0:04:48.440 --> 0:04:53.080 Is that changing the calculation of the traditional sixty forty portfolio? 0:04:53.480 --> 0:04:55.279 Have we moved past that at this point? 0:04:56.279 --> 0:04:56.479 Well? 0:04:56.480 --> 0:04:59.239 Look, I mean I think underneath sixty forty there's always 0:04:59.240 --> 0:05:02.240 a lot of asset classes in there, and from my perspective, 0:05:02.440 --> 0:05:05.680 we have a big strategic weight to alternatives, and so 0:05:05.760 --> 0:05:07.760 private credit would be part of that, you know. And 0:05:07.839 --> 0:05:10.080 so for us, we think about a moderate client approaching 0:05:10.279 --> 0:05:13.719 twenty five percent, and alternatives and private credit would be 0:05:13.720 --> 0:05:15.000 a part of that twenty five percent. 0:05:16.040 --> 0:05:18.520 Christin, you know, I've done some work with some university 0:05:18.560 --> 0:05:21.159 endowments and I am just I'm not shocked, but I'm 0:05:21.160 --> 0:05:25.920 just really surprised at how much endowments have leaned into 0:05:26.040 --> 0:05:28.400 alternative investments, some of them at thirty to forty percent 0:05:28.480 --> 0:05:30.560 of their endowment in alternatives. 0:05:31.839 --> 0:05:33.320 How do you view that source of capital. 0:05:34.360 --> 0:05:37.200 Yeah, look, they've traditionally you know, I think they're leaning in. 0:05:37.240 --> 0:05:39.720 I would bet they're leaning in even more than that today. 0:05:40.120 --> 0:05:43.520 So they've always been one of the largest allocators allocators alternatives. 0:05:43.520 --> 0:05:47.080 I think what you're seeing is the individual investor kind 0:05:47.080 --> 0:05:49.880 of getting up closer to those levels. You know, we 0:05:50.000 --> 0:05:53.040 just did our Family office survey and you know, when 0:05:53.040 --> 0:05:55.840 we went out to that universe of investors, we saw 0:05:55.880 --> 0:05:59.760 that they were on average allocated forty four percent to alternatives, 0:06:00.120 --> 0:06:02.200 so even higher than where you see kind of the 0:06:02.320 --> 0:06:06.000 endowment community. And then further, they're actually mostly looking to 0:06:06.240 --> 0:06:10.880 actually increase that in the coming year. So you know, 0:06:10.920 --> 0:06:12.640 I think you're seeing a bit of a pivot. Obviously, 0:06:12.720 --> 0:06:14.760 we talk a lot about the institutional world having a 0:06:14.760 --> 0:06:18.320 bit of a denominator effect right where their alternatives have performed, 0:06:18.680 --> 0:06:22.960 their traditional assets values have you know, declined, and as 0:06:23.000 --> 0:06:25.280 a result, they're actually not able to keep adding as 0:06:25.360 --> 0:06:28.839 much as they have historically, whereas the individual community, the 0:06:28.839 --> 0:06:32.400 family office community, is actively adding to their alternatives allocations. 0:06:32.800 --> 0:06:35.240 When did this start? When did the interest start to 0:06:35.400 --> 0:06:36.160 really pick up? 0:06:37.080 --> 0:06:40.320 I would say for the ultra high net worth community, 0:06:40.440 --> 0:06:43.720 there's always been very meaningful interest, and the reason being 0:06:43.800 --> 0:06:46.000 that that investor base has the ability to endure the 0:06:46.040 --> 0:06:49.440 ill liquidity and thus benefit from the ill liquidity premium 0:06:49.480 --> 0:06:52.479 in those markets. But over the past several years, I 0:06:52.480 --> 0:06:54.440 think you've seen even more of a lean in to 0:06:54.520 --> 0:06:57.520 alternatives from that channel. And then I think you're seeing growth, 0:06:57.560 --> 0:07:00.560 you know, as we alluded to in the in the 0:07:00.600 --> 0:07:02.719 retail space and the ultra high net and the mass 0:07:02.720 --> 0:07:05.120 affluent space, as more and more people want to access 0:07:05.480 --> 0:07:07.920 the alpha that is generated in these markets. 0:07:08.760 --> 0:07:12.560 Kristin, what does the data show historically about how alternatives 0:07:12.600 --> 0:07:16.480 as an asset class perform in what could be a 0:07:16.560 --> 0:07:19.800 recessionary environment, however shallow it may prove to be. 0:07:20.360 --> 0:07:22.000 Yeah, Look, I think if we look at the past 0:07:22.040 --> 0:07:26.200 twenty five years private equity, the median private equity manager 0:07:26.240 --> 0:07:29.600 has generated positive returns, although they've varied every single year 0:07:29.640 --> 0:07:31.840 for the last twenty five years. And if you think 0:07:31.840 --> 0:07:34.920 about what the alpha, so the outperformance that they're generating 0:07:34.960 --> 0:07:38.440 relative to traditional markets, the median managers across buyot and 0:07:38.480 --> 0:07:41.360 growth have done three to five hundred points basis points 0:07:41.360 --> 0:07:45.280 a year better than their public market equivalent. And if 0:07:45.320 --> 0:07:47.440 you go to top quartel managers that our performance is 0:07:47.440 --> 0:07:50.240 going to be even higher. And so again, if you 0:07:50.280 --> 0:07:53.239 have the ability to endure the illiquidity in this asset class, 0:07:53.360 --> 0:07:57.160 you are getting rewarded even with the median manager, but 0:07:57.360 --> 0:08:00.000 obviously more important to pick top quartel managers in this space. 0:08:01.120 --> 0:08:04.640 Looking a little bit more broadly, kristin, what's your outlook 0:08:04.760 --> 0:08:06.520 for the rest of the year. What are you most 0:08:06.600 --> 0:08:09.480 concerned about and what are you excited about? What's keeping 0:08:09.480 --> 0:08:11.360 you up at night and helping you go to sleep? 0:08:12.200 --> 0:08:15.080 Oh gosh, one of my most concerned about. Well, look, 0:08:15.120 --> 0:08:18.240 I mean I think everyone is concerned about, you know, 0:08:18.240 --> 0:08:20.760 the possibility of actually going into a recession, although it 0:08:20.760 --> 0:08:23.520 seems like some of those fears are abating a little bit. 0:08:24.640 --> 0:08:27.160 I think the beauty in the ASCID class I focus 0:08:27.200 --> 0:08:29.640 in though, is all of these things create different types 0:08:29.680 --> 0:08:31.840 of opportunity. So when you look at the hood under 0:08:31.880 --> 0:08:34.280 the hood, if we do go into a recession or 0:08:34.360 --> 0:08:36.520 hip bumps in the road, you know, we'll start looking 0:08:36.559 --> 0:08:39.160 at managers that can think about how to provide capital 0:08:39.200 --> 0:08:43.040 into those disruptions, right, whether it's a special situations manager, 0:08:43.080 --> 0:08:48.480 strategic lenders, distressed managers. So I think you know, the 0:08:48.480 --> 0:08:50.360 theme of this right as we think about a recession, 0:08:50.400 --> 0:08:52.920 we were there opportunities. I think in alternatives you will 0:08:52.960 --> 0:08:56.679 see opportunities. They'll just be different than the opportunities that 0:08:56.720 --> 0:08:58.880 we were excited about maybe three or four years ago, 0:08:58.880 --> 0:09:01.520 which happened to lean a lot into growth and tech 0:09:01.720 --> 0:09:05.199 and venture. That being said, you know, with valuations down 0:09:05.240 --> 0:09:06.960 a lot, there's going to be opportunity in that space 0:09:07.280 --> 0:09:08.400 as well going forward. 0:09:09.520 --> 0:09:11.440 Kristin, thank you so much for joining us. Really appreciate 0:09:11.440 --> 0:09:14.439 getting some of your time. Christin Olsen, she's a partner 0:09:14.600 --> 0:09:18.280 Alternative Capital Markets at Goldman Sachs, so getting some good 0:09:18.280 --> 0:09:20.760 thoughts there on the alternatives market. 0:09:22.200 --> 0:09:26.040 You're listening to the team. Ken's her live program, Bloomberg Markets, 0:09:26.080 --> 0:09:29.200 weekdays at ten am Eastern on Bloomberg dot Com, the 0:09:29.280 --> 0:09:32.400 iHeartRadio app and the Bloomberg Business App, or listen on 0:09:32.480 --> 0:09:34.439 demand wherever you get your podcasts. 0:09:36.360 --> 0:09:38.160 Madison Mills in New York. 0:09:38.480 --> 0:09:41.320 I'm down here in Orlando, Florida at the BNY Melon 0:09:41.360 --> 0:09:44.120 Pershing Insight Conference. Having a great time down here, but 0:09:44.400 --> 0:09:47.520 unfortunately I miss hanging out with my buddy and Maletti. 0:09:47.559 --> 0:09:50.600 She's Offsprings, head of Active Equity. She's in New York 0:09:51.040 --> 0:09:54.160 with Madison and great to talk to you as always. 0:09:54.880 --> 0:09:57.640 I'm seeing a market here in where I've got seven 0:09:57.679 --> 0:10:00.640 stocks basically driving the entire bu for the S and 0:10:00.679 --> 0:10:04.120 P five hundred. Is it time to look for some 0:10:04.440 --> 0:10:06.240 names that might be getting lost here? 0:10:06.840 --> 0:10:09.360 I think it is, Paul, and I'm sorry I'm missing 0:10:09.400 --> 0:10:11.400 you here in person, but good for you to be 0:10:11.440 --> 0:10:15.760 in Florida. It is the interesting thing, though, is if 0:10:15.800 --> 0:10:20.240 you do look underneath and find time to dig around, 0:10:20.679 --> 0:10:25.920 there are some really interesting stocks and more dispersion when 0:10:25.960 --> 0:10:27.840 you look down cap, when you look in the mid 0:10:28.559 --> 0:10:30.560 cap space, and when you look in the small cap space, 0:10:30.760 --> 0:10:33.400 there's a lot more dispersion. And believe it or not, 0:10:33.920 --> 0:10:36.599 companies are really moving on fundamentals. 0:10:37.600 --> 0:10:40.199 What are the fundamentals that you feel are most important 0:10:40.240 --> 0:10:42.640 to you when sussing out these quality companies? 0:10:42.760 --> 0:10:45.760 Yeah, you know, Madisine, I'm glad you said it, because 0:10:45.760 --> 0:10:47.640 the key really is quality, and I know people are 0:10:47.679 --> 0:10:51.079 tired of hearing it. But when you have uncertain futures 0:10:51.120 --> 0:10:53.400 like we do now, an uncertain future and so many 0:10:53.840 --> 0:10:59.720 macro things that are quite honestly just nobody really knows 0:10:59.480 --> 0:11:02.760 what's going to come next, you have to look at quality. 0:11:03.120 --> 0:11:06.480 For us, that's really balance sheets. It's do they have 0:11:06.559 --> 0:11:11.640 free cash flow? Can they support and direct their own future? 0:11:11.960 --> 0:11:15.200 And clearly, and Paul, you know this probably better than 0:11:15.240 --> 0:11:18.920 I do. Management teams that have had experience dealing with 0:11:19.000 --> 0:11:20.800 difficult times too really helps. 0:11:20.840 --> 0:11:24.400 Sounds that sounds a lot like active management. And so 0:11:24.600 --> 0:11:27.320 I mean, I mean, how do you think about it? 0:11:27.360 --> 0:11:29.520 I mean, one of the things I'm concerned about is 0:11:29.600 --> 0:11:32.480 there's still maybe some earnings risk in this market here. 0:11:33.080 --> 0:11:36.120 How do you think about that issue, that potential headwind? 0:11:36.640 --> 0:11:39.720 Yeah, you know, Paul, we've been in an earnings recession 0:11:39.720 --> 0:11:41.920 and I think that is something also that gets lost. 0:11:42.320 --> 0:11:44.880 Up until this last quarter, you know, we have seen 0:11:45.000 --> 0:11:48.720 earnings declines almost across the board, except for again a 0:11:48.760 --> 0:11:52.480 few names here and there. Even this quarter we had 0:11:52.600 --> 0:11:54.400 very little earnings growth. In fact, I think it only 0:11:54.440 --> 0:11:59.480 came from two sectors, technology and industrials. But we are 0:11:59.520 --> 0:12:02.760 seeing companies that are being able to hold margins pretty well, 0:12:03.120 --> 0:12:05.640 being able to hold arnians pretty well. Those are the 0:12:05.679 --> 0:12:08.880 type of companies that we're looking for. We do think 0:12:08.920 --> 0:12:11.600 the future is going to continue to be uncertain, but 0:12:11.880 --> 0:12:15.320 wouldn't exit the equity markets because we still even if 0:12:15.360 --> 0:12:17.920 there is a downturn, think there's going to be opportunity 0:12:18.160 --> 0:12:23.200 and companies that can adapt and do well, and so 0:12:24.320 --> 0:12:29.360 still kind of bullish on the unique opportunities, not the 0:12:29.400 --> 0:12:30.600 overall opportunity. 0:12:31.080 --> 0:12:34.520 And as Paul mentioned, it's these seven names driving a 0:12:34.520 --> 0:12:37.400 lot of the rally that we've been seeing. When you 0:12:37.440 --> 0:12:40.600 look further down the pipeline, what are some of the 0:12:40.760 --> 0:12:42.600 names or themes if you don't want to talk about 0:12:42.720 --> 0:12:46.920 names that are that investors are missing out on right now? 0:12:47.400 --> 0:12:50.480 You know, the small and mid cap space I think 0:12:50.520 --> 0:12:54.800 has almost been left for dead. They've underperformed. The Russell 0:12:54.840 --> 0:12:58.079 two thousand has underperformed the Russell three thousand five of 0:12:58.120 --> 0:13:01.240 the last consecutive years and nine the last eleven years. 0:13:02.200 --> 0:13:05.160 History would suggest that can't go on for much longer. 0:13:05.520 --> 0:13:08.480 So whether or not we're going to see the larger 0:13:08.520 --> 0:13:12.319 cap names start to sell off or the smaller cap 0:13:12.400 --> 0:13:15.160 names start to outperform, I'm not sure what's going to 0:13:15.200 --> 0:13:18.240 close the gap, but something has to give there, and 0:13:18.280 --> 0:13:20.679 so I think the smaller and mid cap space has 0:13:20.720 --> 0:13:24.160 a lot of opportunity. And what I'm hearing from our 0:13:24.160 --> 0:13:27.280 investment teams is they're seeing it and they're finding it there. Also, 0:13:27.400 --> 0:13:29.800 when the economy slows and we've gone from six percent 0:13:29.840 --> 0:13:34.360 growth down to one, those smaller cap companies tend to 0:13:34.400 --> 0:13:38.480 have faster growth. The only thing I would caution is 0:13:38.720 --> 0:13:41.480 if we do head into a recession, you could see 0:13:41.520 --> 0:13:43.800 a little bit of pause before you see that acceleration. 0:13:44.720 --> 0:13:47.079 Hey, and in a world where an investor can get 0:13:47.080 --> 0:13:49.520 four and a half percent into two year treasury, you 0:13:49.559 --> 0:13:52.240 know how important now are dividends to you and your 0:13:52.280 --> 0:13:54.280 teams here. We had a guest on a few months 0:13:54.280 --> 0:13:55.599 ago that said, you know, this is going to be 0:13:55.600 --> 0:13:57.040 the decade of the dividend. 0:13:57.520 --> 0:13:58.560 How do you guys think about that? 0:13:58.880 --> 0:14:01.360 I do think it's really and Paul, I mean, if 0:14:01.400 --> 0:14:06.240 you can get dividends on top of an equity return, 0:14:06.960 --> 0:14:10.680 that's going to be much more attractive than it was before. 0:14:11.360 --> 0:14:15.400 I think investors, you know, in a double digit teen 0:14:15.720 --> 0:14:19.280 high teen twenty percent return market, people don't really care 0:14:19.280 --> 0:14:22.080 about the dividend. But if we are now in a 0:14:22.160 --> 0:14:26.960 lower return environment where equities return you know, high single digit, 0:14:27.920 --> 0:14:31.160 if we're lucky, that's going to be the return. A 0:14:31.160 --> 0:14:33.840 company that can produce a dividend on top of that, 0:14:33.840 --> 0:14:36.280 that's going to be pretty interesting. And by the way, 0:14:36.280 --> 0:14:39.000 it's also a sign of quality that a company has 0:14:39.040 --> 0:14:41.720 the ability to pay the dividend and maybe increase the 0:14:41.760 --> 0:14:42.560 dividend over time. 0:14:43.640 --> 0:14:48.120 Quality always makes me think about Apple. Uh what do 0:14:48.160 --> 0:14:51.080 you think about the Apple? I mean, is it just 0:14:51.160 --> 0:14:52.480 way overplayed at this point? 0:14:53.040 --> 0:14:57.400 You know, it's interesting because I don't think I mentioned 0:14:57.400 --> 0:14:59.880 the stat but you know, the entire market cap of 0:15:00.040 --> 0:15:02.720 Apple near three trillion dollars. You know, it might be 0:15:02.880 --> 0:15:05.240 well deserved. I'm not going to sit in the seat 0:15:05.240 --> 0:15:08.400 and say that it's not. We probably won't know that 0:15:08.560 --> 0:15:09.160 for the next. 0:15:09.120 --> 0:15:09.760 Year or two. 0:15:10.200 --> 0:15:15.000 But the entire market cap of Apple is bigger than 0:15:15.040 --> 0:15:17.560 the entire market cap of the Russell two thousand. So 0:15:17.640 --> 0:15:19.920 do you want to own some of those two thousand 0:15:20.000 --> 0:15:23.240 companies or one individual company? And I just think the 0:15:23.320 --> 0:15:29.600 risk reward is a little bit less certain with Apple 0:15:29.640 --> 0:15:30.520 at these prices. 0:15:31.640 --> 0:15:33.680 And you know it just you know, a month or 0:15:33.680 --> 0:15:36.400 two ago, all we were talking about was the health 0:15:36.480 --> 0:15:39.360 or the potential headwindow of the US banking system, and 0:15:39.720 --> 0:15:42.760 you know, a handful of names really had had some trouble. 0:15:42.760 --> 0:15:45.440 There is it time to look at some of those regional. 0:15:45.080 --> 0:15:47.560 Banks because it seems to have, you know, kind of 0:15:47.720 --> 0:15:49.880 those concerns seem to have been laid a little bit. 0:15:50.640 --> 0:15:53.120 Yeah, Paul, what I'm hearing from our investment teams on 0:15:53.160 --> 0:15:58.320 the banks, you know, there are probably some opportunities, but 0:15:58.360 --> 0:16:03.720 I think there is also, you know, a real, a 0:16:03.800 --> 0:16:07.120 real thoughtful approach that our teams are taking because they 0:16:07.240 --> 0:16:11.680 know that more change is coming. We're seeing regulators suggests 0:16:11.720 --> 0:16:15.000 that more capital is needed at the big banks. Clearly 0:16:15.160 --> 0:16:19.440 that's coming down to the smaller banks as well. I 0:16:19.520 --> 0:16:22.320 don't know that we've seen the last shoe to drop 0:16:22.640 --> 0:16:25.400 on the smaller regional banks from everything that I'm hearing 0:16:25.400 --> 0:16:29.880 from our investment teams, So I you know, I'm not 0:16:29.920 --> 0:16:34.040 sure that it's time to run and grab all you 0:16:34.080 --> 0:16:35.040 can get in that space. 0:16:35.640 --> 0:16:38.720 We have like thirty seconds left here. What does that 0:16:38.760 --> 0:16:39.840 shoe drop look like? 0:16:40.360 --> 0:16:43.720 You know, That's that's the million dollar questions, And I 0:16:43.760 --> 0:16:46.600 wish I could answer that. I think, you know, we're 0:16:46.640 --> 0:16:51.080 all trying to figure out. You know, there's there's always 0:16:51.160 --> 0:16:53.160 cracks that you see in the market, and you're always 0:16:53.160 --> 0:16:58.640 trying to figure out. I'm certainly a big warrior. I 0:16:58.680 --> 0:17:02.560 would I would say that the likely next shoot to 0:17:02.640 --> 0:17:06.879 drop is the economy is going to see, you know, 0:17:07.040 --> 0:17:11.160 more pressure, the credit tightening that's likely to come from 0:17:11.800 --> 0:17:16.080 these This bank weakness could create pressure across the board, 0:17:16.080 --> 0:17:20.840 and that's that's probably the most likely scenario with Aunay Blackslaw, Yeah. 0:17:20.760 --> 0:17:21.480 And great stuff. 0:17:21.520 --> 0:17:23.600 As always, I always appreciated getting a few minutes of 0:17:23.640 --> 0:17:26.320 your time, particularly when you are in the big town. 0:17:26.359 --> 0:17:30.320 And Maletti, she's all Springs, head of Active Equity and 0:17:30.480 --> 0:17:32.680 as I say, time and time again, pound for pound, 0:17:32.960 --> 0:17:36.879 I think some of the smartest investors are from Milwaukee, Wisconsin. 0:17:36.880 --> 0:17:38.560 And I don't know why, but there's a lot of 0:17:38.560 --> 0:17:40.280 good folks out there doing a lot of good work. 0:17:40.440 --> 0:17:43.560 You're listening to the tape. Catch are live program Bloomberg 0:17:43.600 --> 0:17:47.199 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:17:47.280 --> 0:17:50.520 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:17:50.560 --> 0:17:53.360 You can also listen live on Amazon Alexa from our 0:17:53.359 --> 0:17:58.480 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:17:59.480 --> 0:18:01.320 Now we're going to go to an interview with coinbased 0:18:01.320 --> 0:18:03.280 CEO and co founder Brian Armstrong. He sits down with 0:18:03.320 --> 0:18:06.280 Bloomberg shanale Bassic after the sec suit Coin base for 0:18:06.280 --> 0:18:07.639 a range of alleged violations. 0:18:07.760 --> 0:18:09.240 Let's go to the conversation right now. 0:18:09.800 --> 0:18:11.119 Do you think you're going to have to go here? 0:18:11.960 --> 0:18:15.360 Yeah, Well, this was not unexpected. You know, we've been 0:18:15.400 --> 0:18:17.960 in discussion with the SEC for a long long time, 0:18:18.400 --> 0:18:20.760 even going back to before we were a public company. 0:18:20.760 --> 0:18:22.560 We started sharing with them how we. 0:18:22.520 --> 0:18:25.200 Operate our business, how we list assets on the platform, 0:18:25.359 --> 0:18:29.240 how we think about our staking program, and through a 0:18:29.280 --> 0:18:31.280 large number of dialogues back and forth, they allowed us 0:18:31.320 --> 0:18:34.280 to become a public company. You know, we had many 0:18:34.280 --> 0:18:36.840 discussions with them in the last year when their tones 0:18:36.880 --> 0:18:39.159 started to change and they started to come to us 0:18:39.200 --> 0:18:40.600 with more questions about the business. 0:18:41.160 --> 0:18:42.360 So we were very forthcoming. 0:18:42.359 --> 0:18:44.640 We met with them probably thirty times over the last year, 0:18:45.600 --> 0:18:47.760 and we started to kind of ask them for feedback, 0:18:47.800 --> 0:18:49.399 and we said, you know, we would like there to 0:18:49.440 --> 0:18:52.720 be a robust market in the US to trade crypto securities. 0:18:53.320 --> 0:18:56.919 Of the thousand plus assets we've reviewed today, we've rejected 0:18:57.000 --> 0:18:59.760 ninety percent of them, the ones we we believe our commodities. 0:19:00.240 --> 0:19:02.840 What feedback do you have for this for us? How 0:19:02.840 --> 0:19:04.840 can we come in and register, how can we work together? 0:19:05.359 --> 0:19:08.240 And unfortunately we were met with silence. We really got 0:19:08.240 --> 0:19:11.920 no feedback in those thirty meetings. The first meeting where 0:19:11.920 --> 0:19:14.600 they were scheduled to come and give us feedback, they 0:19:14.600 --> 0:19:16.520 canceled it a few days before that, and then we 0:19:16.560 --> 0:19:18.840 got a wells notice a few days after that. So 0:19:19.080 --> 0:19:21.840 it's really unfortunate. We work with regulators all over the world, 0:19:22.160 --> 0:19:25.600 other regulators here in the US. I think I'm a 0:19:25.920 --> 0:19:29.720 reasonable person to get along with, but unfortunately the SEC 0:19:29.880 --> 0:19:33.960 under this chair has taken a regulation by enforcement approach 0:19:33.960 --> 0:19:36.160 instead of creating a clear rule book in the US 0:19:36.200 --> 0:19:38.240 that can allow this industry to be built in a 0:19:38.280 --> 0:19:39.520 safe and trusted way. 0:19:39.600 --> 0:19:42.720 You know, when was the last time you personally met 0:19:42.760 --> 0:19:44.520 with Gary Gensler and what did you say? 0:19:45.359 --> 0:19:45.560 Right? 0:19:45.600 --> 0:19:48.960 So, when he first came in as the chair, I 0:19:49.000 --> 0:19:51.040 flew out to New York. I reached out to him. 0:19:51.040 --> 0:19:52.960 Our team has reached out. I tried to make an 0:19:53.000 --> 0:19:55.399 effort to connect with him in person, because that's what 0:19:55.440 --> 0:19:57.600 I try to do whenever a new regulator kind of 0:19:57.640 --> 0:20:00.800 comes in. Unfortunately, we were not able to connect at 0:20:00.800 --> 0:20:02.720 that time. I'm not sure why we couldn't get on 0:20:02.720 --> 0:20:06.080 his calendar, and we followed up a few times in 0:20:06.119 --> 0:20:08.520 the in the year after that, we eventually got a 0:20:08.560 --> 0:20:11.040 meeting that was virtual. You know, it may have been 0:20:11.040 --> 0:20:13.440 COVID related or something like that, but we were able 0:20:13.440 --> 0:20:17.240 to get a virtual meeting. But unfortunately, it was frankly 0:20:17.280 --> 0:20:19.760 like a pretty icy reception. I would say, you know, 0:20:20.080 --> 0:20:22.479 we sort of came in hat in hand and said, hey, chere, Gensler. 0:20:22.560 --> 0:20:25.720