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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is Wall Street Week. I'm David Weston bringing you

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Speaker 2: stories of capitalism. Europe is ramping up its defense spending,

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Speaker 2: and we go to Sweden to see why a relatively

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Speaker 2: small player is punching way above its weight. And private

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Speaker 2: credit was all the rage, but we are learning the

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Speaker 2: hard way that it may not be for everybody or

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Speaker 2: for every situation. Plus, we return to Nepaul, where voters

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Speaker 2: have now gone to the polls in the aftermath of

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Speaker 2: that social media fueled uprising of last year. But we

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Speaker 2: start with the state of the US jobs market, where

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Speaker 2: the most recent numbers point to softening. To give us

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Speaker 2: the perspective of an investor, we welcome back Stephen Ratner,

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Speaker 2: chairman and CEO of all the advisors responsible for investing

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Speaker 2: the personal and philanthropic assets of Michael Bloomberg, our founder

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Speaker 2: and majority shareholder. Let's talk about the US labor market

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Speaker 2: right now. We have had some numbers now indicating some

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Speaker 2: softening over the last two or three months. Actually, how

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Speaker 2: concerned are you or should we be?

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Speaker 3: Well, Actually, we've had softening over even the past year.

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Speaker 4: If you look at the number of jobs created on average,

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Speaker 4: it was substantially lower last year than in the previous

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Speaker 4: several years.

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Speaker 3: How concerned should we be? We should be somewhat concerned.

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Speaker 4: It's not a great thing, obviously, to have the unemployment

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Speaker 4: rate going up, to have the number of jobs going down,

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Speaker 4: none of that can be viewed as good. Obviously, we

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Speaker 4: still have had so far anyway, very strong GDP growth,

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Speaker 4: so that is in some ways an even more important indicator.

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Speaker 4: But yeah, it's definitely of concern.

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Speaker 2: As you say, GDP is growing from the numbers we've

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Speaker 2: seen so far for two and a half three percent

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Speaker 2: something like that, and we are not creating as many jobs.

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Speaker 2: Is that a shift in the economy about how many

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Speaker 2: jobs we need to have the same output.

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Speaker 4: Well, obviously, just the simple math is when those two

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Speaker 4: things happen, you get a productivity increase, and that's a

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Speaker 4: good thing. Productivity increases are really what makes the economy

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Speaker 4: more prosperous for everybody. You can't have real incomes go

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Speaker 4: up without productivity growing. In terms of why is this happening,

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Speaker 4: Why is this disconnect happening at this time, there are

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Speaker 4: obviously a bunch of theories. One is AI, which we

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Speaker 4: can come back to. But I think it's absolutely true

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Speaker 4: that companies are battening down the hatchets.

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Speaker 3: They are.

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Speaker 4: Nervous about the tariffs, they're nervous about the uncertainty. There

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Speaker 4: was a huge amount of hiring that went on post

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Speaker 4: COVID when it was hard to find workers. People took

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Speaker 4: whoever they could get, and so they're trying to right

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Speaker 4: size all that. So I think that's really what's mostly

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Speaker 4: driving this e.

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Speaker 2: Employers are worried about the tariffs, but also they've had

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Speaker 2: to pay tariffs, uh and it's been a difficult thing

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Speaker 2: to pass all along to customers. So it is that

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Speaker 2: is it possible the terifts are actually helping on the productivity, ironically.

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Speaker 4: Helping on the productivity and hurting on the jobs because basically,

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Speaker 4: when companies do have these tariffs that they have to

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Speaker 4: pay and then pass on, they look at other costs

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Speaker 4: and say what other costs can we cut and if

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Speaker 4: people are part of it, then they cut the people.

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Speaker 2: Some of the job growth we've seen has been in healthcare.

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Speaker 2: In fact, a month or two ago is all in healthcare.

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Speaker 2: What does that tell us about where our economy is headed?

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Speaker 2: Because we're not really growing jobs almost at all outside

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Speaker 2: of healthcare.

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Speaker 5: No.

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Speaker 4: In fact, manufacturing jobs were down last month, and they've

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Speaker 4: actually been down pretty consistently over the past year or so.

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Speaker 4: And of course a lot of people worry a lot

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Speaker 4: about manufacturing. The healthcare jobs, on the one hand, are

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Speaker 4: perfectly good jobs. We need people to be everything from

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Speaker 4: nurses to doctors to whatever in the healthcare system. But

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Speaker 4: on the other hand, you could make an argument they're

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Speaker 4: not really producing anything. They're taking care of us as

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Speaker 4: we get as our society gets older, and we need

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Speaker 4: more and more healthcare, and so we should also want

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Speaker 4: a more balanced job creation picture in which jobs are

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Speaker 4: being created and all sorts of other things, including manufacturing,

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Speaker 4: including services.

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Speaker 2: How does immigration factor into the labor market at this point,

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Speaker 2: if at all. Obviously don't have the same immigration coming in,

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Speaker 2: and there are some reports that people actually maybe leaving

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Speaker 2: the country. Is that affecting the labor market.

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Speaker 3: I'm a bit of a concern on this.

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Speaker 4: The narrative is yes, it's affecting the labor market, and

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Speaker 4: particularly from people who are pro immigration, they say, CC,

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Speaker 4: we got to have more immigration, and I'm in favor

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Speaker 4: of more immigration, but it's very hard at the moment

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Speaker 4: to see a lack.

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Speaker 3: Of immigration as the reason.

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Speaker 6: Here.

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Speaker 4: We have labor force participation going down, you have the

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Speaker 4: number of job openings going down, you have the number

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Speaker 4: of the unemployment rate going up. So you have a

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Speaker 4: whole bunch of other things that suggest that this is

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Speaker 4: just a very loose jobs market. And also when you

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Speaker 4: look at CEOs on their quarterly earning calls, they're not

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Speaker 4: saying it's hard to find people. Nobody is saying that

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Speaker 4: at the moment, they're in fact talking about how many

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Speaker 4: people they're cutting.

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Speaker 2: You mentioned AI. Does AI factor at all yet.

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Speaker 4: Well, if you look at something like manufacturing, I think

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Speaker 4: pretty obviously it doesn't have anything to do with why

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Speaker 4: we're losing manufacturing jobs. I think it is having at

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Speaker 4: least some anticipatory effect in the sense that companies are saying,

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Speaker 4: we don't need to hire as many engineers this year

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Speaker 4: because we're going to have AI doing more of this stuff.

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Speaker 4: We don't need to hire in the financial services world

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Speaker 4: as many new entrants into our staffing because we're gonna

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Speaker 4: have AI doing more of this stuff. So I do

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Speaker 4: think it's having an anticipatory effect, although I'd be the

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Speaker 4: first to say I don't think it's actually changing the

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Speaker 4: number of people are working at the moment.

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Speaker 2: As an investor, how do you take into account the

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Speaker 2: labor market? How does it affect how you position your portfolio.

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Speaker 4: I don't think the labor market, per se is is

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Speaker 4: really that much of an issue for us. I think

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Speaker 4: we would worry about a couple of things. One, the

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Speaker 4: overall state of the market. And when you have rising

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Speaker 4: unemployment and rising inflation at the same time, which we

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Speaker 4: may have, we're going to get a few more reports.

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Speaker 4: Then that's getting perilous and close to stagflation, and that

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Speaker 4: is really bad for the market, the FED, it's bad,

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Speaker 4: it's tough for the FED, it's bad for the market,

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Speaker 4: and so forth. And then there are certain sectors, particularly software,

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Speaker 4: where the anticipatory effect again of AI, seems to be

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Speaker 4: the greatest, and so it becomes fairly perilous to work

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Speaker 4: your way around the stock market under that circumstance.

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Speaker 2: Stay colasi is a thing that all economs say we

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Speaker 2: have to avoid. That's really dangerous for us. What can

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Speaker 2: we do at this point, I mean the government or

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Speaker 2: private industry, what can we do to really avoid the

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Speaker 2: risk of stall collation?

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Speaker 4: Getting rid of the tariffs would certainly be a good

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Speaker 4: start in terms of reducing costs for business, and therefore

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Speaker 4: they don't have to raise prices quite as much. Beyond that,

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Speaker 4: I'm not sure in the short run there's that much.

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Speaker 3: We can do.

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Speaker 4: In a longer run, you want to have a more

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Speaker 4: flexible economy, you want to deregulate, you want to try

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Speaker 4: to make it more competitive, things like that. But in

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Speaker 4: the short run you sometimes get in this box that

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Speaker 4: we may be heading toward.

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Speaker 2: What does this mean for the FED potentially? I mean,

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Speaker 2: how do they address this. We're going through a transition

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Speaker 2: obviously with the chair of the Fed, but how do

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Speaker 2: they address the situation where we do have growth, we

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Speaker 2: may have a softening labor market, and there's concern about

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Speaker 2: basically inflation at the same time that we have slow

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Speaker 2: in growth.

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Speaker 3: It's tough for the Fed.

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Speaker 4: They have a dual mandate, as you know, where they

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Speaker 4: have to focus on both unemployment and no inflation, and

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Speaker 4: so you can't, you know, you can't necessarily do both

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Speaker 4: things at the same time. There's a FED meeting in

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Speaker 4: the middle of March. The anticipation of further rate cuts

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Speaker 4: this year has already dropped a bit because in part

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Speaker 4: because of the war and the effect on oil prices

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Speaker 4: and how that's going to pass through into inflation, and so.

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Speaker 3: The Fed's gonna have a tough decision.

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Speaker 4: I think it's highly unlikely, almost implausible that they would

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Speaker 4: raise rates at this point. The question is how much

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Speaker 4: do they cut them. It had been expected they would

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Speaker 4: cut them twice this year. I think that may become one,

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Speaker 4: it may become none before done. But that's the range

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Speaker 4: of possibilities.

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Speaker 2: There's some nervousness in the market these days about private credit,

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Speaker 2: which sort of is a junk adjunct to the AI

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Speaker 2: investment that we have. Is it a real problem as

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Speaker 2: you look out at the credit mark, it's do you

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Speaker 2: think there's a real issue there?

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Speaker 3: I think there's definitely gonna be some pain.

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Speaker 4: I think there were a lot of UH loans made

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Speaker 4: to particularly software companies, what we call arr loans, where

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Speaker 4: they were made annual recurring revenue. They're made on the

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Speaker 4: base of revenues as opposed to profits. That's the revenues

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Speaker 4: don't I don't necessarily mean you're solvent.

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Speaker 3: They just mean you have revenues.

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Speaker 4: And so those those kinds of loans and this a

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Speaker 4: this happens in every cycle. I don't mean to be

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Speaker 4: blase about it, but it happens in every cycle. So

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Speaker 4: I don't worry too much about private credit. There there's

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Speaker 4: gonna be pain, but the system is not as leverage

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Speaker 4: and not as sort of badly engineered as it was

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Speaker 4: in two thousands to two thousand seven, two thousand and eight.

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Speaker 2: You've got investments that Y don't get marked to market

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Speaker 2: every single day. Oh yeah, yeah, So how do you

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Speaker 2: make sure that you get the right data? I mean,

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Speaker 2: we see that in all sorts of places, including China.

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Speaker 2: Sometimes people say, I'm not sure if the data coming

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Speaker 2: out of China is reliable. How do you know that

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Speaker 2: your risk data is reliable?

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Speaker 4: We don't necessarily know it on a day to day basis,

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Speaker 4: but we uh, we watch the companies carefully. We have

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Speaker 4: an idea as to what would be good or bad

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Speaker 4: for them, and we do get quarterly marks and we

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Speaker 4: get financial statements, and so we can try to analyze

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Speaker 4: the quarterly marks and see if they're accurate or not.

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Speaker 4: But given that their private investments is not usually a

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Speaker 4: whole heck of a lot, we can do about it anyway,

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Speaker 4: and so we just try not to make new mistakes

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Speaker 4: and live with our old ones.

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Speaker 2: We have a new risk right now, which is the

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Speaker 2: war with Iran. Has that taught us anything about safe havens?

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Speaker 2: I mean, if you look what's happened to the dollar

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Speaker 2: and when it happened to the US treasuries, it's interesting

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Speaker 2: what's happened. Actually the treasury is sold off to some extent,

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Speaker 2: people went to the dollar. Are the nature of safe

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Speaker 2: havens changing?

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Speaker 3: That's a great question.

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Speaker 4: I think the dollar is a safe haven and most

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Speaker 4: people see it, and you, as you said, that's probably

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Speaker 4: what we've been seeing. I think treasures are more complicated

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Speaker 4: because the war creates inflation, and inflation is bad for treasuries,

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Speaker 4: and so you could argue that that's why treasury should

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Speaker 4: sell off.

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Speaker 3: From this set of circumstances.

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Speaker 4: But look, it's been an odd situation because gold until

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Speaker 4: recently and silver also until recently, have been so strong

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Speaker 4: that those are normally indicators of a lot of fear

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Speaker 4: out there in the market. But the market has been

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Speaker 4: pretty stable, even with the last week or two of commotion.

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Speaker 4: It's been pretty stable all things considered. So it's something

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Speaker 4: people have been puzzling over, which is why on the

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Speaker 4: one hand, people why have people have been going to

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Speaker 4: these things like gold? But on the other hand, there's

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Speaker 4: still They still appear to be very much invested in stocks.

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Speaker 2: Up next, Europe rushes to get up to speed on

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Speaker 2: defense spending, and a surprising leader in the effort is

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Speaker 2: one we don't typically associate with supplying arms. This is

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Speaker 2: a story about punching above your weight. For decades, Europe

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Speaker 2: relied on America's a military mine for its security, confident

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Speaker 2: that large scale war on the continent was a relic

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Speaker 2: of the past. Russia's invasion of Ukraine changed all of that.

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Speaker 2: Now Europe is increasing defense spending, rebuilding industrial capacity, and

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Speaker 2: getting ready to enter the arena on its own if

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Speaker 2: it needs to, and it's looking to the traditional leaders

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Speaker 2: such as Germany and the United Kingdom to step up.

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Speaker 2: But it turns out that there's a smaller country playing

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Speaker 2: an outsize role, one that might surprise you. When you

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Speaker 2: think of Sweden, you might picture snow covered streets, mineralist design,

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Speaker 2: maybe even Ikea or Abba. Defense manufacturing probably isn't the

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Speaker 2: first thing that comes to mind, but maybe it should be.

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Speaker 2: Here At Saab, production has been ramping up. The company

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Speaker 2: reported record orders on the books, and it's not just

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Speaker 2: fighter jets. SAB builds everything from missiles and radar to

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Speaker 2: surveillance systems and naval platforms, capabilities few countries sustained domestically.

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Speaker 2: CEO Michael Johansen describes the magnitude of the new demand.

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Speaker 7: I think if I look at our company, we have

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Speaker 7: probably four to five folded output from for like before

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Speaker 7: the war started. So lots is happening, and I think

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Speaker 7: we are underestimating the capacity of the European defense industry.

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Speaker 2: For a country of just ten million people, that's significant.

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Speaker 2: But the phenomenon is not uniquely Swedish. European defense company

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Speaker 2: stocks are surging, with other major players like Ryan Mattal

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Speaker 2: and Leonardo reporting record years along with SAAB four years

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Speaker 2: into the war in Ukraine. The demand driving those record

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Speaker 2: numbers is no longer just crisis support. It has become

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Speaker 2: a broader story about Europe's new security posture, a story

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Speaker 2: echoed across the Atlantic as President Trump pushes NATO allies

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Speaker 2: to spend more.

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Speaker 8: We were paying for almost all of that.

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Speaker 9: Now they're paying five as opposed to not paying. It's

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Speaker 9: a wake up call the European people know that we

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Speaker 9: will have to stand our own feet, be more independent.

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Speaker 2: Anders for Rossmussen is the former NATO Secretary General and

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Speaker 2: Prime Minister of Denmark.

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Speaker 9: For too long we relied on a combination of cheap

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Speaker 9: end from Russia, cheap goods from China and cheap security

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Speaker 9: from the United States. That model doesn't work any longer.

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Speaker 9: Now we have to stand our own feet. We need

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Speaker 9: to shift gear. We will need to make Europe a

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Speaker 9: defense super power.

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Speaker 2: But not every country is willing or able. According to

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Speaker 2: economist Jacob Kickergard, a senior fellow at Brussels based think

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Speaker 2: tank Breugel, I know.

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Speaker 10: We say that, oh, Europe is rearming, but the reality

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Speaker 10: is that Europe as a whole is not rearming. There

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Speaker 10: is a limited number of countries that rearm. That includes

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Speaker 10: at least two big ones, first and foremost of course Germany,

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Speaker 10: the other one being Poland, and then a number of

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Speaker 10: smaller countries, particularly in Scandinavia and other parts of Eastern Europe.

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Speaker 11: And these are.

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Speaker 10: Countries that actually do have, if you like, latent fiscal capacity,

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Speaker 10: Germany again being the case in point. And therefore there

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Speaker 10: is a self selection the countries that can have both

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Speaker 10: guns and butter while they're rearming. But those that had

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Speaker 10: to choose, and by that I mean France, Italy, Spain,

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Speaker 10: the UK, they are much more hesitant when it comes

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Speaker 10: to significantly increasing defense expenditures.

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Speaker 2: Defense has the potential to become a stronger economic driver

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Speaker 2: across Europe. The EU is targeting fifty to defense procurement

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Speaker 2: to be from EU suppliers by twenty thirty, a meaningful

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Speaker 2: shift considering that after Russia's invasion that number was roughly

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Speaker 2: twenty five percent. But meeting that goal requires production capacity,

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Speaker 2: and that's where Sweden stands out. It has maintained that

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Speaker 2: production capacity for the better part of a century, in

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Speaker 2: part because it historically relied more on exports than other

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Speaker 2: European manufacturers, and that continuity matters. There's a I would

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Speaker 2: say dramatic ramp up in the spending right now, but

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Speaker 2: there were years where there was not as much attention

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Speaker 2: or investment in Europe in defense. How did SOB maintain

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Speaker 2: its investments.

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Speaker 7: We have never sort of dismantled sort of everything else

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Speaker 7: you are alluding to within our company, and that goes

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Speaker 7: back to our ownership. I think even though we are

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Speaker 7: stock exchange company publicly listed, we have a strong owner

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Speaker 7: and the Ballenberg family, and they have always been long

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Speaker 7: term and also very loyal to of the Torrents and

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Speaker 7: the defense of Sweden for many many decades, and so

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Speaker 7: we never dismantled. We continuously invested more on our own.

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Speaker 7: I would say, when sort of the government didn't sort

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Speaker 7: of fund everything that we wanted them to fund. And

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Speaker 7: we have always been a company that takes sort of

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Speaker 7: a lot of our top line and our bottom line

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Speaker 7: for that sake to reinvest in R and D to

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Speaker 7: always be relevant in the short time frame but also

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Speaker 7: long term. So we are a bit unique in that sense,

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Speaker 7: I think, not only looking at relying upon governments all

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Speaker 7: the time to keep our operations efficient and state of

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Speaker 7: the art.

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Speaker 2: Sweden has been ready to step up on defense and

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Speaker 2: it's entry into NATO in twenty twenty four sealed the deal.

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Speaker 2: As you describe, Russia's invasion of Ukraine triggered an awful

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Speaker 2: lot with the defense industry. It also was a wake

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Speaker 2: up call for Sweden as Sweden joined NATO. How has

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Speaker 2: that affected SABS businesses at all? Sweden's being in NATO.

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Speaker 7: Now for the company, I would say, all of a sudden,

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Speaker 7: we are involved in the common acquisitions that NATO is

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Speaker 7: doing now and then from the acquisition authority within NATO NSPA,

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Speaker 7: and of course we're much more involved in understanding where

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Speaker 7: NATO is going in terms of capabilities needed short and

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Speaker 7: long term, which we were actually outside not having an

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Speaker 7: insight into. We didn't come into play when it comes

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Speaker 7: to acquisitions before we join NATO really or when we

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Speaker 7: became an invitee.

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Speaker 8: It's completely different.

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Speaker 7: Now we have framework contracts with NATO, so we get

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Speaker 7: contracts from that organization.

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Speaker 8: We understand what we can be offering going forward.

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Speaker 7: We work better with the Alliance capability transformation organizations.

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Speaker 8: So this is a big shift, and of course it

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Speaker 8: comes down to.

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Speaker 7: Now we are we're a country that can be relied

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Speaker 7: upon long term because we are in the Alliance, and

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Speaker 7: with that comes that SAB is long term trustworthy as well.

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Speaker 2: Expanded access to NATO markets brings opportunity, but it also

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Speaker 2: brings pressure to scale production, invest in research, and carefully

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Speaker 2: manage capital.

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Speaker 7: I think we've managed our sort of operational capital and

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Speaker 7: also are capital employed in a very good way. While

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Speaker 7: we are sort of investing five times more in capacity

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Speaker 7: building than we did before the war, we are investing

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Speaker 7: heavily in R and D. But still we have a strong,

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Speaker 7: solid balance sheet, and that is of course about sort

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Speaker 7: of making sure that you have contracts that gives you

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Speaker 7: continuous cash flow, but also that some customers are prepared

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Speaker 7: to give you some advanced payments so we don't have

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Speaker 7: to act as a bank. So it's still more to

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Speaker 7: be discussed with government, but so far capital wise, we

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Speaker 7: are doing well.

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Speaker 2: There was a time when in the United States, and

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Speaker 2: I think in parts of Europe, there was a sense

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Speaker 2: that investors, particularly institutional investors, were reluctant to invest in defense.

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Speaker 2: That seems to be changing now.

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Speaker 8: It's making a big change on that side.

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Speaker 7: I mean, I remember in January twenty two, shortly before

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Speaker 7: this tragic war broke out, we had lots of discussions

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Speaker 7: in Brussels about the what we call the taxonomy and

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Speaker 7: if this was sustainable business, which was crazy in the

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Speaker 7: way I see it, because I mean, if you have

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Speaker 7: politicians saying you have a threatn environment, then we decide

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Speaker 7: as a country that we need needed defense force. Of course,

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Speaker 7: you have to have professional and strong defense industries to

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Speaker 7: create that strong defense. But that was a strange discussion

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Speaker 7: about this type of business. We're not sort of sustainable,

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Speaker 7: and investors wouldn't get an echo able sort of stamp

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Speaker 7: on their funds if they invested in defense. That of

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Speaker 7: course sort of disappeared more or less completely, not all

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Speaker 7: of it, but lots of it when the war broke

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Speaker 7: out and we realized that we had to catch up.

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Speaker 7: So I mean, if you look at SAB, I think

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Speaker 7: we were forty five thousand shareholders before the war broke

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Speaker 7: out and we are three hundred thousand shareholders as we speak.

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Speaker 8: So it's been a big change in the perception.

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Speaker 2: And it isn't just shareholders who are backing their ramp

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Speaker 2: up in defense production. The Swedish government is right there

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Speaker 2: with them. As explained by Finance Minister Elizabeth Swantisen.

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Speaker 12: It is definitely a booth in the economy. We have

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Speaker 12: six percentage year of GDP in different public investments. I

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Speaker 12: think we are in the top in EU, and of

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Speaker 12: course the fund spending is one of the big investments.

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Speaker 12: And we have this defense industry. It's strong, so that's important.

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Speaker 12: And what I think a lot of a lot about

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Speaker 12: is how can we do that? I mean, this will

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Speaker 12: change labor market economy. How can you have the synergy

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Speaker 12: effects and how can this this will affect the labor market, economy,

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Speaker 12: How can we do it in the best way innovation,

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Speaker 12: you know, technique, development and so on. I mean, we

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Speaker 12: are we are raising double defense spending just now and

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Speaker 12: it will be more. That in itself is helping because

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Speaker 12: many or much of what will be produced will be

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Speaker 12: produced in Sweden or in Europe, of course, and so

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Speaker 12: we're helping that way.

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Speaker 2: But not all European financial institutions are as supportive of

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Speaker 2: the move into defense spending, especially when it comes to

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Speaker 2: multilateral lenders like the European Investment Bank.

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Speaker 10: I think much too little has been done. I know

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Speaker 10: that the you know, European leaders when they meet in

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Speaker 10: their buy you know, bi annual or every quarter every time,

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Speaker 10: they usually have a cent that says, oh, the EIB

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Speaker 10: and other multilateral lenders should do more. But we're four

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Speaker 10: years into this war, and you know, the direct funding,

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Speaker 10: for instance, from the EIB and other multilateral lenders to

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Speaker 10: European defense is very limited. The direct involvement also of

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Speaker 10: say European pension funds remain very limited. And I think

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Speaker 10: that is quite frankly a clear policy failure. And what

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Speaker 10: I would call initial executive institutional inertia. You have not

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Speaker 10: had leaders in these institutions, both the policy institutions and

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Speaker 10: the private sector institutions to basically push this. I think

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Speaker 10: it's a mistake, but it obviously hasn't prevented private capital,

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Speaker 10: venture fund funding and others from flowing into the sector.

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Speaker 10: And with the equity valuations increases that we have seen

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Speaker 10: the increase in European funding a venture capital funding in

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Speaker 10: the sector as well, but it has been largely despite

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Speaker 10: the traditional pillars of European the European financial system, in

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Speaker 10: the large banks, in the pension funds, and in the

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Speaker 10: policy lending institutions off the European Union.

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Speaker 2: And that may be an important reason why Sweden is

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Speaker 2: punching above its weight when it comes to defense, a

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Speaker 2: combination of being prepared, having the support of investors, and

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Speaker 2: recognizing an urgent need coming up looking for and past

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Speaker 2: the cracks in private credit.

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Speaker 13: I get nervous anytime any particular strategy gets a little

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Speaker 13: bit crowded.

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Speaker 2: Where it's just what is needed and where it may

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Speaker 2: not be. This is a story about one size not

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Speaker 2: fitting all, particularly when it comes to risk. Private credit

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Speaker 2: has become all the rage over the last few years,

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Speaker 2: with some of the largest alternative asset firms catapulting themselves

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Speaker 2: into managing hundreds of billions of dollars.

442
00:24:27,080 --> 00:24:30,200
Speaker 14: They've done very very well over time, built big businesses.

443
00:24:30,440 --> 00:24:32,960
Speaker 2: And the growth in private credit isn't limited to the

444
00:24:33,119 --> 00:24:33,760
Speaker 2: United States.

445
00:24:33,960 --> 00:24:37,040
Speaker 15: They need private capital, they need risk taking. We're seeing

446
00:24:37,040 --> 00:24:39,080
Speaker 15: it in Germany and we're seeing it here where Japan

447
00:24:39,240 --> 00:24:41,280
Speaker 15: is just more hospitable to private capital.

448
00:24:41,440 --> 00:24:43,919
Speaker 2: But in recent days, the shin on private credit has

449
00:24:43,960 --> 00:24:46,600
Speaker 2: come off after some people have had trouble getting their

450
00:24:46,680 --> 00:24:47,200
Speaker 2: money out.

451
00:24:48,840 --> 00:24:51,680
Speaker 15: Shares of KKR and Blue Owl were down as much

452
00:24:51,680 --> 00:24:53,680
Speaker 15: as ten percent yesterday.

453
00:24:53,280 --> 00:24:55,960
Speaker 16: And I think we're seeing the first sign of stress

454
00:24:56,080 --> 00:24:56,919
Speaker 16: around these funds.

455
00:24:57,200 --> 00:25:00,600
Speaker 2: Although the lending is private, concerns about thedustry have made

456
00:25:00,640 --> 00:25:03,840
Speaker 2: their way into public markets, with shares of Blue Owl,

457
00:25:03,960 --> 00:25:05,959
Speaker 2: Apollo and others under pressure.

458
00:25:06,200 --> 00:25:09,560
Speaker 13: I get nervous anytime any particular strategy gets a little

459
00:25:09,600 --> 00:25:10,240
Speaker 13: bit crowded.

460
00:25:10,800 --> 00:25:14,480
Speaker 2: Andrew Junkin invests in private credit. As Chief Investment Officer

461
00:25:14,840 --> 00:25:18,680
Speaker 2: for the Virginia Retirement System. He oversees pension assets for

462
00:25:18,800 --> 00:25:22,680
Speaker 2: two hundred and thirty thousand Virginia public employees and allocates

463
00:25:22,680 --> 00:25:25,679
Speaker 2: about sixteen percent of their one hundred and thirty billion

464
00:25:25,760 --> 00:25:27,200
Speaker 2: dollars to private credit.

465
00:25:27,920 --> 00:25:31,200
Speaker 13: I think the capacity for the private credit markets to

466
00:25:31,359 --> 00:25:36,440
Speaker 13: absorb the growth that has happened and that is forecasted

467
00:25:36,520 --> 00:25:40,560
Speaker 13: to continue to happen is probably pretty solid. It's not

468
00:25:40,840 --> 00:25:45,600
Speaker 13: the highest expected return asset class that we have. That

469
00:25:45,640 --> 00:25:49,040
Speaker 13: would probably be private equity, but it is higher than

470
00:25:49,440 --> 00:25:52,200
Speaker 13: public fixed income, which for US is really investment grade.

471
00:25:52,240 --> 00:25:55,720
Speaker 13: I mean, that's kind of the sleep at night treasuries agencies,

472
00:25:55,800 --> 00:26:00,640
Speaker 13: investment grade corporate portfolio, private crest. It has a little

473
00:26:00,680 --> 00:26:03,720
Speaker 13: bit more credit risk in it, of course, but the

474
00:26:04,280 --> 00:26:07,320
Speaker 13: yield is higher and we're expecting returns kind of in

475
00:26:07,440 --> 00:26:11,000
Speaker 13: the seven eight to nine percent over the long term.

476
00:26:11,600 --> 00:26:15,680
Speaker 13: Right now, we do think that private credit has expected

477
00:26:15,720 --> 00:26:17,679
Speaker 13: returns that are a little bit higher, which is one

478
00:26:17,680 --> 00:26:19,480
Speaker 13: of the reasons in the short term we've been sort

479
00:26:19,480 --> 00:26:20,760
Speaker 13: of increasing our allocation.

480
00:26:21,240 --> 00:26:24,720
Speaker 2: Marcy Frost is CEO of Counpers, the largest public pension

481
00:26:24,800 --> 00:26:26,240
Speaker 2: fund in the United States.

482
00:26:26,760 --> 00:26:30,040
Speaker 5: On the private credit side, we've been very specialized and

483
00:26:30,320 --> 00:26:34,160
Speaker 5: working only with high quality managers. We had an eight

484
00:26:34,240 --> 00:26:36,720
Speaker 5: percent allocation to private credit, and I think we're hovering

485
00:26:36,800 --> 00:26:39,520
Speaker 5: around four percent, and we believe that that book is

486
00:26:39,960 --> 00:26:43,080
Speaker 5: diversified enough that the team is really not too concerned

487
00:26:43,119 --> 00:26:44,720
Speaker 5: about the software exposure.

488
00:26:45,119 --> 00:26:49,359
Speaker 2: For regulators, dramatic rapid growth in any asset class often

489
00:26:49,520 --> 00:26:50,480
Speaker 2: raises questions.

490
00:26:51,080 --> 00:26:57,120
Speaker 6: Anytime an asset class grows very quickly in absolute amounts

491
00:26:57,160 --> 00:27:02,959
Speaker 6: but also profitability, it should invite closer scrutiny. It doesn't

492
00:27:03,080 --> 00:27:05,119
Speaker 6: mean it's necessarily problematic.

493
00:27:05,400 --> 00:27:07,919
Speaker 2: Dan Trulo served as a member of the Federal Reserve

494
00:27:07,960 --> 00:27:11,280
Speaker 2: Board from twy and nine to twenty seventeen, with particular

495
00:27:11,320 --> 00:27:15,600
Speaker 2: responsibility for bank oversight. He's now professor of law at Harvard.

496
00:27:15,840 --> 00:27:18,760
Speaker 6: Well, there are certainly risks, David. I mean the way

497
00:27:18,840 --> 00:27:21,359
Speaker 6: I had put things now is we should be on

498
00:27:21,600 --> 00:27:24,480
Speaker 6: yellow alert, you know, not red alert. The story about

499
00:27:24,480 --> 00:27:27,719
Speaker 6: private credit, which is to a considerable extent the right story,

500
00:27:28,240 --> 00:27:31,960
Speaker 6: is that it's filled in a gap that banks either

501
00:27:32,160 --> 00:27:37,200
Speaker 6: never quite worked in traditionally, which is providing funding of

502
00:27:37,400 --> 00:27:42,840
Speaker 6: certain sorts in leverage buyouts, private equity transactions, but also

503
00:27:43,119 --> 00:27:46,840
Speaker 6: kind of moving into some other areas because of some

504
00:27:47,000 --> 00:27:49,680
Speaker 6: of the advantages that they have, and also because of

505
00:27:49,800 --> 00:27:53,159
Speaker 6: capital requirements for banks. So if we take that as

506
00:27:53,200 --> 00:27:56,560
Speaker 6: a starting point and say, okay, for regulatory and business

507
00:27:56,640 --> 00:28:00,359
Speaker 6: reasons banks aren't. In some of these spaces private credit

508
00:28:00,480 --> 00:28:03,439
Speaker 6: moves in. It's not as though the banks are now

509
00:28:03,880 --> 00:28:07,800
Speaker 6: totally out of the exposure, because banks have been providing

510
00:28:07,960 --> 00:28:12,520
Speaker 6: and do provide a substantial amount of backup credit credit

511
00:28:12,640 --> 00:28:18,000
Speaker 6: lines for private credit funds, and thus the exposure of

512
00:28:18,240 --> 00:28:23,280
Speaker 6: banks is indirect rather than direct. But indirect exposure can

513
00:28:23,359 --> 00:28:25,639
Speaker 6: be just as damaging as direct exposure.

514
00:28:25,800 --> 00:28:29,480
Speaker 2: JP Morgan just this week decided to limit its indirect

515
00:28:29,520 --> 00:28:32,840
Speaker 2: exposure by restricting lending to some funds. The degree of

516
00:28:32,960 --> 00:28:35,920
Speaker 2: risk in private credit depends, of course, on what you're

517
00:28:35,960 --> 00:28:39,400
Speaker 2: comparing it to a point apollows Mark Rowan knows all

518
00:28:39,480 --> 00:28:40,280
Speaker 2: too well, and.

519
00:28:40,360 --> 00:28:43,959
Speaker 15: It's de risking for individuals because people are not funding

520
00:28:44,000 --> 00:28:47,600
Speaker 15: their investments in these BDCs with their treasury portfolio. They're

521
00:28:47,640 --> 00:28:51,360
Speaker 15: selling their equities. Last I looked firstly in debt is

522
00:28:51,400 --> 00:28:55,000
Speaker 15: senior to equity. They are making an intelligent decision that

523
00:28:55,040 --> 00:28:57,680
Speaker 15: they can earn equity like returns without equity like risk

524
00:28:58,120 --> 00:28:59,360
Speaker 15: and take money off the table.

525
00:28:59,520 --> 00:29:02,560
Speaker 13: I mentioned that public equity is about thirty two percent

526
00:29:02,600 --> 00:29:05,800
Speaker 13: of our portfolio, and that private credit had moved up,

527
00:29:05,920 --> 00:29:09,120
Speaker 13: or credit strategies had moved up. Actually the funding source

528
00:29:09,200 --> 00:29:12,360
Speaker 13: for that had been largely public equity, so for us

529
00:29:12,560 --> 00:29:14,720
Speaker 13: it was kind of a relative value trade.

530
00:29:14,600 --> 00:29:18,360
Speaker 2: Whatever the comparison. Managing the risk in private credit is critical,

531
00:29:18,640 --> 00:29:21,640
Speaker 2: as in any investment. That's a major theme of Lloyd

532
00:29:21,720 --> 00:29:25,400
Speaker 2: Blankfeine's new book street Wise, about his career at Goldman Sachs.

533
00:29:25,960 --> 00:29:29,640
Speaker 2: He describes Goldman's risk management system based on marking assets

534
00:29:29,680 --> 00:29:33,080
Speaker 2: to market daily, something that's difficult to do with assets

535
00:29:33,160 --> 00:29:36,440
Speaker 2: like private credit that by their very nature don't change

536
00:29:36,520 --> 00:29:40,560
Speaker 2: hands regularly. But something Apollo Global Management just announced it

537
00:29:40,760 --> 00:29:41,600
Speaker 2: was moving toward.

538
00:29:42,080 --> 00:29:44,800
Speaker 14: It's ill liquid. I mean it's liquid for good reasons.

539
00:29:44,840 --> 00:29:48,160
Speaker 17: If you're financing on you know, lending somebody two hundred

540
00:29:48,200 --> 00:29:53,040
Speaker 17: million dollars on something, and you want to sell ten

541
00:29:53,120 --> 00:29:54,840
Speaker 17: percent of it, who's going to do the credit work

542
00:29:55,000 --> 00:29:57,520
Speaker 17: on such a small piece and you just don't have

543
00:29:57,760 --> 00:30:00,560
Speaker 17: the liquidity to see it and say a lot of

544
00:30:00,640 --> 00:30:02,760
Speaker 17: these people, a lot of the people who are doing

545
00:30:02,840 --> 00:30:05,320
Speaker 17: is running these portfolio will say they are marking them,

546
00:30:05,920 --> 00:30:07,120
Speaker 17: but how do you market.

547
00:30:07,040 --> 00:30:10,080
Speaker 2: Tarula agrees that the illiquidity of private credit makes it

548
00:30:10,240 --> 00:30:13,680
Speaker 2: more difficult to keep valuations current, but he also has

549
00:30:13,880 --> 00:30:14,720
Speaker 2: other concerns.

550
00:30:15,200 --> 00:30:18,320
Speaker 6: One of the things that worries me here is that

551
00:30:18,840 --> 00:30:25,400
Speaker 6: the information gaps we have aren't being plugged as to

552
00:30:25,520 --> 00:30:29,000
Speaker 6: the best of the ability of the regulators, and you

553
00:30:29,080 --> 00:30:31,960
Speaker 6: know they if they did that work, we might all

554
00:30:32,080 --> 00:30:36,320
Speaker 6: be somewhat reassured. I suspect would probably find some issues

555
00:30:36,400 --> 00:30:39,440
Speaker 6: and problems that need to be dealt with. But it's

556
00:30:39,720 --> 00:30:44,480
Speaker 6: both the opaqueness of the valuations of many of these investments,

557
00:30:44,560 --> 00:30:47,880
Speaker 6: because you know, there's no price discovery for these ill

558
00:30:47,880 --> 00:30:52,800
Speaker 6: liquid loans, and the fact that the regulators are not

559
00:30:53,120 --> 00:30:56,960
Speaker 6: helping the rest of us pope through that opacity and

560
00:30:57,040 --> 00:30:58,840
Speaker 6: figure out exactly what is going on.

561
00:30:59,160 --> 00:30:59,320
Speaker 10: Well.

562
00:30:59,400 --> 00:31:02,000
Speaker 2: Concerns about the risk profile for private credit are on

563
00:31:02,120 --> 00:31:05,400
Speaker 2: the rise. Others point to its strengths in spite of

564
00:31:05,520 --> 00:31:06,880
Speaker 2: the recent market turmoil.

565
00:31:07,160 --> 00:31:11,320
Speaker 13: Obviously, some companies have some credit issues and either they

566
00:31:12,080 --> 00:31:15,800
Speaker 13: get refinanced or in some cases they get reorganized. But

567
00:31:16,400 --> 00:31:18,959
Speaker 13: by and large, I would say that the fault rate

568
00:31:19,040 --> 00:31:23,280
Speaker 13: has been lower than has been expected historically, and so

569
00:31:23,440 --> 00:31:27,120
Speaker 13: the returns have commensurately been probably a little bit higher.

570
00:31:27,880 --> 00:31:30,680
Speaker 2: Making sure that private credit is the right investment depends

571
00:31:30,760 --> 00:31:33,480
Speaker 2: every bit as much on who's doing the investing as

572
00:31:33,520 --> 00:31:35,920
Speaker 2: it does on the nature of the credit being extended.

573
00:31:36,560 --> 00:31:38,920
Speaker 2: What may make sense as part of a large portfolio

574
00:31:39,080 --> 00:31:42,680
Speaker 2: for an institutional investor may be wrong for retail investors

575
00:31:42,840 --> 00:31:43,920
Speaker 2: saving for retirement.

576
00:31:44,240 --> 00:31:47,800
Speaker 6: One of the biggest advantages of private credit has been

577
00:31:48,480 --> 00:31:52,880
Speaker 6: that the capital is tied up. That means there's not

578
00:31:53,080 --> 00:31:57,280
Speaker 6: liquidity for the investors, but it also means that the

579
00:31:57,520 --> 00:32:01,120
Speaker 6: private credit fund has a very good sense of when

580
00:32:01,200 --> 00:32:04,120
Speaker 6: it's going to face redemptions and how much capital it

581
00:32:04,200 --> 00:32:09,840
Speaker 6: has available. As the private credit people have moved have

582
00:32:10,000 --> 00:32:13,200
Speaker 6: tried to move more and more into retail, we've seen

583
00:32:13,240 --> 00:32:15,960
Speaker 6: this liquidity. This is the liquidity issue that's blowing up

584
00:32:16,040 --> 00:32:21,520
Speaker 6: that you referred to earlier. Retail investors just don't think

585
00:32:21,760 --> 00:32:25,000
Speaker 6: in terms of long term investments, and they can't get

586
00:32:25,040 --> 00:32:28,400
Speaker 6: their money out no matter how badly the underlying investment

587
00:32:28,560 --> 00:32:32,440
Speaker 6: is doing. But a little bit of liquidity is not

588
00:32:32,600 --> 00:32:35,800
Speaker 6: the way people who are used to investing in stocks

589
00:32:35,880 --> 00:32:39,200
Speaker 6: and money market funds and ETFs. It's not the way

590
00:32:39,240 --> 00:32:42,840
Speaker 6: they think about it. And that limitation on liquidity, I think,

591
00:32:43,200 --> 00:32:45,959
Speaker 6: is a lot of what's putting the pressure on at

592
00:32:46,000 --> 00:32:47,440
Speaker 6: the retail level right now.

593
00:32:47,960 --> 00:32:48,400
Speaker 10: We have the.

594
00:32:50,000 --> 00:32:55,680
Speaker 13: Potential for individual investor behavior to create some mismatch between

595
00:32:55,760 --> 00:33:00,560
Speaker 13: the structure and the underlying investments in this structure. So

596
00:33:00,960 --> 00:33:03,760
Speaker 13: think back to the global financial crisis. I think a

597
00:33:03,840 --> 00:33:08,080
Speaker 13: number of academic studies afterwards showed that individual investors in

598
00:33:08,160 --> 00:33:11,040
Speaker 13: four oh one ks in many cases panicked and de

599
00:33:11,320 --> 00:33:13,760
Speaker 13: risked kind of right at the bottom of the market.

600
00:33:14,480 --> 00:33:16,840
Speaker 13: And if there's a big run to sell, whether it's

601
00:33:16,880 --> 00:33:21,840
Speaker 13: private credit or private equity when prices are down, I

602
00:33:22,000 --> 00:33:25,120
Speaker 13: think that could create some challenges for that market to

603
00:33:25,320 --> 00:33:27,280
Speaker 13: function efficiently and effectively.

604
00:33:27,560 --> 00:33:30,320
Speaker 17: It's not any more likely that a security will be

605
00:33:30,400 --> 00:33:32,640
Speaker 17: good or bad in the hands of a retail person

606
00:33:33,440 --> 00:33:39,000
Speaker 17: versus an institution, but the consequences of it being wrong

607
00:33:39,160 --> 00:33:42,800
Speaker 17: and being bad from a political sociological side of way

608
00:33:42,920 --> 00:33:48,720
Speaker 17: are much worse because the political sector can watch with

609
00:33:48,920 --> 00:33:53,239
Speaker 17: interest but not much action if big institutions and very

610
00:33:53,320 --> 00:33:56,200
Speaker 17: high net worth individuals lose money.

611
00:33:57,000 --> 00:33:59,880
Speaker 14: But if four to one K plan start to lose money.

612
00:34:00,120 --> 00:34:03,720
Speaker 17: Individuals that were brought in late in the cycle, you

613
00:34:03,800 --> 00:34:05,680
Speaker 17: know there's going to be there's gonna be a lot,

614
00:34:05,880 --> 00:34:08,239
Speaker 17: there's going to be an inquiry or an inquisition that

615
00:34:08,360 --> 00:34:09,000
Speaker 17: will follow this.

616
00:34:09,400 --> 00:34:12,719
Speaker 2: As Torulo says, it's not time for a red alert yet,

617
00:34:13,320 --> 00:34:16,040
Speaker 2: but the worst case scenario for private credit might not

618
00:34:16,239 --> 00:34:17,680
Speaker 2: be what we are expecting.

619
00:34:17,960 --> 00:34:20,440
Speaker 6: What I regard as the bigger risk right now is

620
00:34:20,520 --> 00:34:25,320
Speaker 6: not so much financial stability, it's more macroeconomic that is,

621
00:34:25,719 --> 00:34:28,520
Speaker 6: how much leverage is there totally in the system. We

622
00:34:28,640 --> 00:34:31,960
Speaker 6: know there's leverage by the companies that are borrowing from

623
00:34:32,040 --> 00:34:35,560
Speaker 6: the private credit funds, but are the investor to what

624
00:34:35,680 --> 00:34:39,320
Speaker 6: degree are the investors in the private credit funds also borrowing?

625
00:34:39,600 --> 00:34:43,000
Speaker 6: To what degree of the private credit funds themselves borrowing?

626
00:34:43,960 --> 00:34:46,600
Speaker 6: And once you you know, you really need to have

627
00:34:46,719 --> 00:34:50,640
Speaker 6: that sense of how much leverage is there, and you

628
00:34:50,800 --> 00:34:53,480
Speaker 6: need to have a sense of what would happen if

629
00:34:53,640 --> 00:34:59,480
Speaker 6: the investments into the private credit funds dried up so

630
00:34:59,600 --> 00:35:02,680
Speaker 6: that they ca no longer make the kinds of loans

631
00:35:02,719 --> 00:35:07,200
Speaker 6: that they've been making. Under those circumstances, I would expect

632
00:35:07,320 --> 00:35:10,720
Speaker 6: that banks and other providers of credit could step into

633
00:35:10,880 --> 00:35:14,800
Speaker 6: some degree, but I don't think they'd be able to

634
00:35:14,880 --> 00:35:17,399
Speaker 6: fill the hole entirely, and so you'd have the same

635
00:35:17,560 --> 00:35:21,120
Speaker 6: kind of problem of concern that you have when banks

636
00:35:21,160 --> 00:35:24,760
Speaker 6: are encumbered because of losses, they can't make more loans,

637
00:35:25,200 --> 00:35:30,320
Speaker 6: and they are denying credit to credit worthy households and businesses.

638
00:35:30,719 --> 00:35:34,200
Speaker 6: So as we sit here today, I'm actually somewhat more

639
00:35:34,239 --> 00:35:39,960
Speaker 6: concerned about the macroeconomic impact of private credit than the

640
00:35:40,440 --> 00:35:43,880
Speaker 6: financial stability or macro prudential impact of private credit.

641
00:35:46,360 --> 00:35:49,600
Speaker 2: Up next, we turn to the High Himalayas to revisit

642
00:35:49,680 --> 00:35:53,080
Speaker 2: the aftermath of that social media fueled revolution in Nepal

643
00:35:53,640 --> 00:36:09,800
Speaker 2: and what it says about uprisings across the globe. This

644
00:36:10,040 --> 00:36:13,279
Speaker 2: is a story about moving mountains, when and whether the

645
00:36:13,360 --> 00:36:15,920
Speaker 2: power of the people can shift the tectonic plates of

646
00:36:16,000 --> 00:36:19,520
Speaker 2: governments around the world. Late last year, we brought you

647
00:36:19,600 --> 00:36:22,600
Speaker 2: to Nepal. We're an idea about fairness spread across the

648
00:36:22,760 --> 00:36:26,239
Speaker 2: nation and helped bring down the regime. This past week,

649
00:36:26,360 --> 00:36:29,319
Speaker 2: the sweeping changes continued as the thirty four year old

650
00:36:29,440 --> 00:36:32,840
Speaker 2: mayor of Katmandu headed to a landslide victory to be

651
00:36:32,920 --> 00:36:36,120
Speaker 2: the country's next prime minister. To understand what's happened, we

652
00:36:36,239 --> 00:36:38,839
Speaker 2: have to go back to the beginning. Our colleague Michael

653
00:36:38,880 --> 00:36:41,800
Speaker 2: McKee takes us to the High Himalayas for the anatomy

654
00:36:42,000 --> 00:36:42,680
Speaker 2: of a revolution.

655
00:36:46,360 --> 00:36:49,600
Speaker 11: We plan to have a very small, peaceful protest.

656
00:36:51,600 --> 00:36:53,759
Speaker 18: Did you stay off of social media or did you

657
00:36:53,840 --> 00:36:54,680
Speaker 18: go back to posting?

658
00:36:54,920 --> 00:36:54,960
Speaker 5: No?

659
00:36:55,320 --> 00:36:56,680
Speaker 11: I go went back to poasting.

660
00:36:56,760 --> 00:36:58,000
Speaker 16: I will never stop posting.

661
00:36:58,600 --> 00:37:00,359
Speaker 11: It's fine even if I dying.

662
00:37:02,120 --> 00:37:04,200
Speaker 18: Now more than ever, people have a window into the

663
00:37:04,280 --> 00:37:08,640
Speaker 18: lives of others. Social media connects youth across countries and continents,

664
00:37:08,960 --> 00:37:12,680
Speaker 18: but it also shows them riches beyond their reach. And

665
00:37:12,800 --> 00:37:17,760
Speaker 18: as inequality and unfairness become more conspicuous, some gen zers

666
00:37:17,840 --> 00:37:22,040
Speaker 18: have taken to the streets. In Nepal, a small democratic

667
00:37:22,080 --> 00:37:25,640
Speaker 18: country wedged between Tibet and India, what started as a

668
00:37:25,719 --> 00:37:29,320
Speaker 18: few angry posts became a movement that overthrew the government.

669
00:37:29,920 --> 00:37:33,360
Speaker 16: We were marching towards the parlament gate. And I was

670
00:37:33,440 --> 00:37:37,760
Speaker 16: always very opinionated. I used to have opinions in everything.

671
00:37:37,920 --> 00:37:39,000
Speaker 11: I was a rebel kid.

672
00:37:39,480 --> 00:37:41,000
Speaker 16: This video is about me, or asked.

673
00:37:41,080 --> 00:37:43,920
Speaker 18: Prashamsa Subeti is a twenty two year old law student

674
00:37:44,000 --> 00:37:48,000
Speaker 18: who lives with her parents in the outskirts of Nepal's capital, Katmandu.

675
00:37:48,800 --> 00:37:51,799
Speaker 18: Not long ago, her life took a surprising turn.

676
00:37:52,920 --> 00:37:54,360
Speaker 11: It was twenty twenty.

677
00:37:54,200 --> 00:37:59,040
Speaker 16: Four when I started uploading the videos about my political opinion,

678
00:37:59,160 --> 00:38:02,560
Speaker 16: what I the government was doing raw and that's when

679
00:38:02,640 --> 00:38:03,319
Speaker 16: it took off.

680
00:38:04,440 --> 00:38:08,760
Speaker 18: In late June, after ANPOLLI politician downplayed the country's poverty.

681
00:38:09,320 --> 00:38:13,479
Speaker 18: So Baby posted an angry response on TikTok. A day later,

682
00:38:13,800 --> 00:38:15,760
Speaker 18: her clip had over a million views.

683
00:38:16,880 --> 00:38:22,440
Speaker 16: How can one leader monthly monthly see that gait? Before

684
00:38:22,480 --> 00:38:25,200
Speaker 16: when we think of it, these politicians would not have

685
00:38:25,320 --> 00:38:28,160
Speaker 16: their life public, so we would not know what their

686
00:38:28,200 --> 00:38:32,279
Speaker 16: lifestyle was, how everything was going. But then there is

687
00:38:32,320 --> 00:38:35,880
Speaker 16: a very famous politician. One of his family members was

688
00:38:35,920 --> 00:38:39,400
Speaker 16: a vlogger, and she used to document their lives and

689
00:38:39,719 --> 00:38:42,560
Speaker 16: every clips used to go viral, and people used to

690
00:38:42,640 --> 00:38:45,759
Speaker 16: see what lavish lifestyle they were having, which we could

691
00:38:45,800 --> 00:38:48,920
Speaker 16: not even imagine. So that is how it all sparked.

692
00:38:48,960 --> 00:38:50,360
Speaker 11: That is how it all triggered.

693
00:38:51,200 --> 00:38:55,120
Speaker 10: There's sudden visibility to how much richer the rich are

694
00:38:55,200 --> 00:38:57,839
Speaker 10: than the poor, right that ability to kind of see

695
00:38:57,880 --> 00:38:59,080
Speaker 10: over the palace walls.

696
00:39:00,560 --> 00:39:03,839
Speaker 18: Clay Shirky studies the effect of social media on politics

697
00:39:04,000 --> 00:39:05,120
Speaker 18: at New York University.

698
00:39:05,920 --> 00:39:10,280
Speaker 19: In Revolution after revolution, there has been some sudden change

699
00:39:10,360 --> 00:39:13,000
Speaker 19: in perception of how the wealthier living in Nepal.

700
00:39:13,160 --> 00:39:14,880
Speaker 14: It was around this idea of Nepo babies, right.

701
00:39:14,920 --> 00:39:18,080
Speaker 19: It was the idea that the children of the rich

702
00:39:18,200 --> 00:39:21,440
Speaker 19: were not suffering the way the rest of chen Z was.

703
00:39:22,640 --> 00:39:25,480
Speaker 18: Something had changed about the way Nepal's youth saw their

704
00:39:25,520 --> 00:39:29,279
Speaker 18: country and the lives of its wealthiest citizens. It was

705
00:39:29,400 --> 00:39:32,839
Speaker 18: not just the inequality that felt wrong, but the inequality

706
00:39:32,920 --> 00:39:36,160
Speaker 18: of opportunity, the idea that those at the bottom would

707
00:39:36,239 --> 00:39:38,799
Speaker 18: never have the chance to rise up and those at

708
00:39:38,800 --> 00:39:41,040
Speaker 18: the top might not deserve to be there at all.

709
00:39:41,640 --> 00:39:45,600
Speaker 18: As the online fearer grew, the government made a dramatic decision.

710
00:39:45,920 --> 00:39:49,000
Speaker 16: And Nepaula stragged down on a number of social media platforms,

711
00:39:49,040 --> 00:39:51,320
Speaker 16: including Facebook, YouTube, Instagram.

712
00:39:51,719 --> 00:39:57,160
Speaker 11: X I was foster of all utterly hopeless and helpless.

713
00:39:58,239 --> 00:40:00,680
Speaker 18: Eighteen year old Schaswat lama Chan was one of the

714
00:40:00,800 --> 00:40:04,279
Speaker 18: many gen Zers who was angry about the social media ban.

715
00:40:05,239 --> 00:40:08,120
Speaker 20: Talked with some activist friends, figured out like what we

716
00:40:08,239 --> 00:40:11,720
Speaker 20: could do, and the concluded that the doing a protest

717
00:40:11,760 --> 00:40:12,840
Speaker 20: will be the best way to do it.

718
00:40:14,000 --> 00:40:17,480
Speaker 18: Lamichan says he expected two hundred protesters to show up,

719
00:40:18,120 --> 00:40:20,560
Speaker 18: but across the country others like him. We're putting out

720
00:40:20,560 --> 00:40:23,120
Speaker 18: the same call to friends and influencers.

721
00:40:23,920 --> 00:40:27,120
Speaker 19: The collective action problem is if one person goes to

722
00:40:27,200 --> 00:40:30,240
Speaker 19: the government and is protesting out front, they are completely helpless.

723
00:40:30,480 --> 00:40:33,160
Speaker 19: But if a thousand people do, they have to pay attention.

724
00:40:33,480 --> 00:40:35,799
Speaker 19: And if ten thousand people do. They're overwhelmed.

725
00:40:36,480 --> 00:40:40,080
Speaker 18: That's what happened on September eighth, when you woke up

726
00:40:40,120 --> 00:40:40,640
Speaker 18: in the morning.

727
00:40:40,960 --> 00:40:41,839
Speaker 11: I didn't see that day.

728
00:40:44,560 --> 00:40:48,440
Speaker 16: We all plan to wear school dresses so that police

729
00:40:48,440 --> 00:40:52,680
Speaker 16: could not even beat us because it's illegal to beat

730
00:40:53,160 --> 00:40:56,160
Speaker 16: school children. And we were one hundred meters a week

731
00:40:56,200 --> 00:40:59,440
Speaker 16: from Parliament where we were sitting, and we got the

732
00:40:59,560 --> 00:41:00,560
Speaker 16: sense of tear gas.

733
00:41:02,280 --> 00:41:04,080
Speaker 18: In an instant, everything changed.

734
00:41:04,920 --> 00:41:07,200
Speaker 16: That is when I got the news of a person

735
00:41:07,280 --> 00:41:10,640
Speaker 16: being killed. We didn't think it would go that far,

736
00:41:11,400 --> 00:41:13,759
Speaker 16: but there was a news of a person being targeted.

737
00:41:14,680 --> 00:41:16,640
Speaker 16: I was just scrolling through the news. I could not work,

738
00:41:16,640 --> 00:41:18,359
Speaker 16: I could not do anything. I was just scrolling through

739
00:41:18,360 --> 00:41:22,399
Speaker 16: the one scroll one, that one scroll one that's after

740
00:41:22,520 --> 00:41:25,120
Speaker 16: the news that one person is shot and he's dead.

741
00:41:25,560 --> 00:41:28,520
Speaker 16: I felt so guilty because he might have watching my videos,

742
00:41:30,080 --> 00:41:31,960
Speaker 16: so maybe I am responsible for his death.

743
00:41:33,080 --> 00:41:37,719
Speaker 11: Police firing eco sauce at children, children dying.

744
00:41:38,560 --> 00:41:42,360
Speaker 18: News of the violence traveled quickly and then escalation.

745
00:41:45,000 --> 00:41:47,960
Speaker 16: The very clip that I would say that ignited the

746
00:41:48,040 --> 00:41:51,280
Speaker 16: fire in the people was a seventeen year old getting

747
00:41:51,320 --> 00:41:52,160
Speaker 16: shot on his head.

748
00:41:54,600 --> 00:41:58,080
Speaker 11: Our palaces were burnt, our banks were looted.

749
00:41:58,840 --> 00:42:01,120
Speaker 18: By the end of the violence, over seventy people had

750
00:42:01,200 --> 00:42:05,680
Speaker 18: died two thousand injured. On September ninth, one day after

751
00:42:05,760 --> 00:42:10,520
Speaker 18: the protests began, many of Nepal's top leaders resigned, including

752
00:42:10,680 --> 00:42:11,960
Speaker 18: the Prime Minister himself.

753
00:42:12,960 --> 00:42:15,960
Speaker 16: We never imagine this situation. It was like nobody told

754
00:42:16,040 --> 00:42:18,680
Speaker 16: us we would be a country without a government.

755
00:42:19,640 --> 00:42:22,840
Speaker 18: But then an unexpected phone call in the middle of

756
00:42:22,880 --> 00:42:23,360
Speaker 18: the night.

757
00:42:24,160 --> 00:42:28,160
Speaker 20: The Iman invited us to sit down with them at

758
00:42:28,200 --> 00:42:31,319
Speaker 20: the army headquarters to talk on what to do next.

759
00:42:31,520 --> 00:42:33,279
Speaker 11: But the future of the country should look like.

760
00:42:34,320 --> 00:42:37,240
Speaker 18: Subeedi also got the army's call, along with a handful

761
00:42:37,280 --> 00:42:41,560
Speaker 18: of others. We ask you helped start this, now come

762
00:42:41,640 --> 00:42:44,840
Speaker 18: fix it. Lamichan, who had started a chat room to

763
00:42:45,080 --> 00:42:49,080
Speaker 18: organize the protests, helped create another, this time to pick

764
00:42:49,200 --> 00:42:53,440
Speaker 18: a new leader. The name they chose Sushila Khaki, a

765
00:42:53,560 --> 00:42:57,160
Speaker 18: retired Supreme Court justice known for fighting corruption and supporting

766
00:42:57,200 --> 00:43:01,279
Speaker 18: women's rights. Subeti, the lass to got her phone number.

767
00:43:02,160 --> 00:43:04,560
Speaker 16: She was asking if we were okay and everything, and

768
00:43:04,680 --> 00:43:06,719
Speaker 16: we asked her to step up, and then she said,

769
00:43:07,239 --> 00:43:10,480
Speaker 16: if you guys are trusting on me, then I will

770
00:43:10,560 --> 00:43:12,760
Speaker 16: have to step up because it's not about me anymore.

771
00:43:12,800 --> 00:43:13,600
Speaker 16: It's about the country.

772
00:43:14,440 --> 00:43:17,600
Speaker 18: For Subedi and others, a look over the palace wall

773
00:43:17,760 --> 00:43:22,600
Speaker 18: made them angry, but then also hopeful for a better future,

774
00:43:23,480 --> 00:43:27,319
Speaker 18: hopefully enough to take action, and now hopeful that their

775
00:43:27,400 --> 00:43:29,319
Speaker 18: action will be worth the sacrifice.

776
00:43:32,680 --> 00:43:36,120
Speaker 2: On March fifth, Nepal's citizens took the next step towards

777
00:43:36,120 --> 00:43:39,120
Speaker 2: delivering on the changes they saw last September, going to

778
00:43:39,160 --> 00:43:42,080
Speaker 2: the polls to elect a new prime minister. We spoke

779
00:43:42,120 --> 00:43:45,520
Speaker 2: with Thomas Caruther's Chair for Democracy Studies at the Carnegie

780
00:43:45,600 --> 00:43:49,120
Speaker 2: Endowment for International Peace and a leading scholar on democracy

781
00:43:49,200 --> 00:43:52,600
Speaker 2: and governance globally. He finds the results dramatic.

782
00:43:54,640 --> 00:43:57,360
Speaker 21: The March fifth election and Nepaul looks like a pivotal

783
00:43:57,440 --> 00:44:01,719
Speaker 21: moment in Nepolee's political history. Sure, the huge demonstrations of

784
00:44:01,840 --> 00:44:06,360
Speaker 21: last September, which pushed for really dramatic political change, voters

785
00:44:06,400 --> 00:44:10,000
Speaker 21: have delivered that change, coming to power as Prime Minister

786
00:44:10,200 --> 00:44:14,080
Speaker 21: bringing with him the RSP party is Balndra Shaw in

787
00:44:14,160 --> 00:44:17,640
Speaker 21: his mid thirties. He's the former mayor of Katmandu. The

788
00:44:17,760 --> 00:44:19,680
Speaker 21: news makes a lot of him as an ex rapper,

789
00:44:19,840 --> 00:44:21,800
Speaker 21: but let's not forget the fact that he's been mayor

790
00:44:21,840 --> 00:44:24,839
Speaker 21: of the capital city for almost four years. He comes

791
00:44:24,920 --> 00:44:29,120
Speaker 21: in interestingly as a centrist. RSP is a centrist party,

792
00:44:29,200 --> 00:44:33,120
Speaker 21: but comes in with a mandate for sweeping reforms. Nepalese

793
00:44:33,239 --> 00:44:37,440
Speaker 21: voters are highly dissatisfied, angry, They want change.

794
00:44:38,719 --> 00:44:41,200
Speaker 2: So what do we know about his policies from his

795
00:44:41,280 --> 00:44:43,640
Speaker 2: time as mayor or what he has campaigned on in

796
00:44:43,719 --> 00:44:44,200
Speaker 2: this election.

797
00:44:44,880 --> 00:44:47,000
Speaker 21: I think we could call him at least he tries

798
00:44:47,080 --> 00:44:49,960
Speaker 21: to be a sort of technocratic activist, if you will,

799
00:44:50,040 --> 00:44:53,400
Speaker 21: an activist who tries to focus on good governance, transparency,

800
00:44:54,040 --> 00:44:57,640
Speaker 21: kind of basic governance reforms. He's not coming for change

801
00:44:58,160 --> 00:45:00,680
Speaker 21: from the left or from the right, but really from

802
00:45:00,719 --> 00:45:03,360
Speaker 21: the middle out, which is I think appealing to the

803
00:45:03,440 --> 00:45:06,680
Speaker 21: many youth who protested last fall, who represent a kind

804
00:45:06,719 --> 00:45:10,440
Speaker 21: of non ideological movement, a sort of post ideological movement,

805
00:45:10,800 --> 00:45:13,040
Speaker 21: which is characteristic of so many of the gen Z

806
00:45:13,239 --> 00:45:15,040
Speaker 21: protests that we've seen in the last year.

807
00:45:15,440 --> 00:45:17,680
Speaker 2: The story in Nepaul has caught a lot of attention

808
00:45:17,800 --> 00:45:21,319
Speaker 2: around the world with the social media phenomenon and then

809
00:45:21,360 --> 00:45:24,040
Speaker 2: the uprising that came after that. From what you understand

810
00:45:24,080 --> 00:45:28,400
Speaker 2: in Nepaul, might that have similar effects in other countries.

811
00:45:29,000 --> 00:45:31,200
Speaker 21: Over the last twelve months, we've seen a wave of

812
00:45:31,280 --> 00:45:34,120
Speaker 21: what quickly got to be named gen Z protests. We've

813
00:45:34,160 --> 00:45:37,839
Speaker 21: seen them in Africa in Kenya and Madagascar, seen them

814
00:45:37,880 --> 00:45:41,040
Speaker 21: in other parts of Asia like Indonesia, the Philippines, seen

815
00:45:41,080 --> 00:45:43,600
Speaker 21: them in the Middle East with Morocco, seen them in

816
00:45:43,680 --> 00:45:47,000
Speaker 21: South America with Peru. All these protests have a couple

817
00:45:47,040 --> 00:45:50,759
Speaker 21: of things in common. Dominated by young people, often kind

818
00:45:50,760 --> 00:45:56,080
Speaker 21: of leaderless in their form, rather spontaneous, somewhat non ideological,

819
00:45:56,480 --> 00:46:01,040
Speaker 21: very delivery oriented, here's what we want, and nonviolent for

820
00:46:01,120 --> 00:46:04,640
Speaker 21: the most part. So these protests have certain common characteristics

821
00:46:04,680 --> 00:46:07,960
Speaker 21: and they have the same kind of drivers. Corruption is

822
00:46:08,040 --> 00:46:11,960
Speaker 21: just a big issue among young people in all of

823
00:46:12,040 --> 00:46:15,239
Speaker 21: these regions, all of these countries. Corruption is a big thing.

824
00:46:15,520 --> 00:46:20,239
Speaker 21: Economic grievances are important, and again that general sense of underrepresentation.

825
00:46:20,760 --> 00:46:23,200
Speaker 21: And this is course the issue with so many struggling

826
00:46:23,280 --> 00:46:27,080
Speaker 21: democracies around the world. Citizens losing their patients wanting to

827
00:46:27,160 --> 00:46:30,000
Speaker 21: see that, you know, having political and civil rights also

828
00:46:30,080 --> 00:46:32,800
Speaker 21: brings them some benefit to their everyday life. It's not

829
00:46:33,000 --> 00:46:35,480
Speaker 21: just in the developing world. I think people feel it

830
00:46:35,560 --> 00:46:38,359
Speaker 21: in many quote wealthy, established democracies as well.

831
00:46:39,080 --> 00:46:41,760
Speaker 2: All of this happening as a backdrop of the war

832
00:46:42,080 --> 00:46:44,799
Speaker 2: in Iran right now, a very very different country. Where

833
00:46:44,920 --> 00:46:47,960
Speaker 2: Nepal is very small, Iran is very very large. It's

834
00:46:48,000 --> 00:46:51,360
Speaker 2: something like ninety million people size of much of Western Europe.

835
00:46:51,560 --> 00:46:55,120
Speaker 2: We had seen some uprisings, civil uprisings in Iran before

836
00:46:55,320 --> 00:46:58,719
Speaker 2: this war happened. What do you think the effects maybe

837
00:46:58,800 --> 00:47:00,680
Speaker 2: on the young people of Iran of what we're seeing

838
00:47:00,760 --> 00:47:01,040
Speaker 2: right now.

839
00:47:01,640 --> 00:47:04,960
Speaker 21: Well, the young people of Iran stood up incredibly bravely

840
00:47:05,040 --> 00:47:08,560
Speaker 21: in December and January and were massacred by the thousands,

841
00:47:08,640 --> 00:47:11,680
Speaker 21: by just really an amount of violence we have not

842
00:47:11,840 --> 00:47:14,960
Speaker 21: seen against protesters anywhere in the world in the last

843
00:47:15,000 --> 00:47:18,359
Speaker 21: ten or twenty years. Inevitably, Iran is driven by its

844
00:47:18,400 --> 00:47:21,000
Speaker 21: own political dynamics, but I think many young people in

845
00:47:21,120 --> 00:47:24,440
Speaker 21: Iran were inspired somewhat by this wave of what I

846
00:47:24,640 --> 00:47:27,319
Speaker 21: described as gen Z protests around the world. So maybe

847
00:47:27,400 --> 00:47:30,239
Speaker 21: not Nepal specifically, but it was one part of a

848
00:47:30,320 --> 00:47:33,440
Speaker 21: larger wave which I think many young people in Iran

849
00:47:33,800 --> 00:47:36,120
Speaker 21: feel they would like to be part of and would

850
00:47:36,239 --> 00:47:39,360
Speaker 21: like to see the ability to have a voice to

851
00:47:39,480 --> 00:47:42,520
Speaker 21: bring to power someone who listens to them and tries

852
00:47:42,600 --> 00:47:44,360
Speaker 21: to respond to their needs and interests.

853
00:47:46,640 --> 00:47:48,440
Speaker 2: That does it for us Here at Wall Street Week

854
00:47:48,640 --> 00:47:51,600
Speaker 2: I'm David Weston. See you next week for more stories

855
00:47:51,840 --> 00:47:52,600
Speaker 2: of capitalism.