1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: And we may not have an overall recession, we're having 3 00:00:04,400 --> 00:00:06,720 Speaker 2: a rolling recession to kind of ROWL looks pretty strongly. 4 00:00:06,720 --> 00:00:08,840 Speaker 2: It is when it comes to jobs, the financial stories 5 00:00:08,920 --> 00:00:11,960 Speaker 2: that shape our world. Three major regional bank failures send 6 00:00:12,000 --> 00:00:14,680 Speaker 2: shockwaves through the banking system. We're all trying to figure 7 00:00:14,680 --> 00:00:17,320 Speaker 2: out what to make of generative AI through. 8 00:00:17,160 --> 00:00:19,320 Speaker 3: The eyes of the most influential voices. 9 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, am Bank of America, 10 00:00:22,520 --> 00:00:25,279 Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of 11 00:00:25,280 --> 00:00:26,280 Speaker 2: the Columbia Business School. 12 00:00:26,280 --> 00:00:30,160 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 13 00:00:30,400 --> 00:00:33,559 Speaker 2: Making history and not always in a good way, in 14 00:00:33,600 --> 00:00:36,839 Speaker 2: the Middle East, in California, in regional banking, and in 15 00:00:36,960 --> 00:00:40,839 Speaker 2: sports streaming. This is Bloomberg Wall Street Week. I'm David Weston. 16 00:00:41,720 --> 00:00:44,760 Speaker 2: This week, Julian Salisbury of Sixth Street on the surge 17 00:00:44,760 --> 00:00:46,040 Speaker 2: and alternative investing. 18 00:00:46,720 --> 00:00:51,000 Speaker 4: You've seen like a greater interest in investing in private capital. 19 00:00:51,560 --> 00:00:55,160 Speaker 2: Former FDIC had Sheila Bear on the continuing struggles of 20 00:00:55,200 --> 00:00:55,960 Speaker 2: regional banks. 21 00:00:56,240 --> 00:00:59,880 Speaker 5: That's really more about commercial real estate than New York Community. 22 00:00:59,440 --> 00:01:03,040 Speaker 2: Bank and Jonathan Karp of Simon and Schuster with Petz 23 00:01:03,080 --> 00:01:06,200 Speaker 2: stavros O Kkar on an iconic publishing house in the 24 00:01:06,240 --> 00:01:07,720 Speaker 2: hands of private equity. 25 00:01:08,000 --> 00:01:12,120 Speaker 6: This idea of broad based ownership has really energized the company. 26 00:01:12,280 --> 00:01:15,600 Speaker 7: With this unloved gem of a business inside of paramount. 27 00:01:28,200 --> 00:01:32,600 Speaker 2: Living through history can sometimes try the nerves Global Wall Street. 28 00:01:32,640 --> 00:01:35,679 Speaker 2: This week watch with concern as Israel's fight with Mamas 29 00:01:35,920 --> 00:01:39,000 Speaker 2: threatened to spill over into the Greater Region, even as 30 00:01:39,040 --> 00:01:43,240 Speaker 2: Secretary of State Blincoln continued shuttle diplomacy to contain the fighting. 31 00:01:43,560 --> 00:01:45,440 Speaker 8: There's still a lot of work to be done, but 32 00:01:46,040 --> 00:01:49,720 Speaker 8: we continue to believe that an agreement is possible and 33 00:01:49,960 --> 00:01:54,120 Speaker 8: indeed essential, and we will continue to work relentlessly to 34 00:01:54,200 --> 00:01:54,680 Speaker 8: achieve it. 35 00:01:55,440 --> 00:01:58,440 Speaker 2: California spent much of the week battling rains that were 36 00:01:58,480 --> 00:02:02,720 Speaker 2: truly historic, causing buildings to slide down mountains in floods 37 00:02:02,760 --> 00:02:06,040 Speaker 2: of mud. Regional banks took another shot this week as 38 00:02:06,080 --> 00:02:08,760 Speaker 2: New York Community Bank stock fell to its lowest level 39 00:02:08,800 --> 00:02:11,560 Speaker 2: in twenty seven years after it cut its dividend and 40 00:02:11,639 --> 00:02:14,640 Speaker 2: had its credit rating lowered, leading it to try to 41 00:02:14,680 --> 00:02:16,280 Speaker 2: clean up its balance sheet. 42 00:02:16,639 --> 00:02:19,200 Speaker 5: This is a bank that's very large and has just 43 00:02:19,320 --> 00:02:22,000 Speaker 5: gone over the one hundred billion dollar. 44 00:02:23,520 --> 00:02:24,240 Speaker 9: Asset level. 45 00:02:24,280 --> 00:02:28,480 Speaker 5: That is, that is giving it a lot closer regulatory scrutinate. 46 00:02:28,760 --> 00:02:31,480 Speaker 2: And the Walt Disney Company announced earnings that beat all 47 00:02:31,480 --> 00:02:34,480 Speaker 2: expectations and drove the stock up, even as it sought 48 00:02:34,480 --> 00:02:37,400 Speaker 2: to combine its sports streaming business with that of Fox 49 00:02:37,639 --> 00:02:41,080 Speaker 2: and Warner Brothers Discovery in what would make sports history. 50 00:02:41,600 --> 00:02:43,680 Speaker 2: The purpose of the venture is purely distribution. 51 00:02:44,200 --> 00:02:45,960 Speaker 8: It's not about procurement of content. 52 00:02:46,040 --> 00:02:48,800 Speaker 3: So we'll continue to compete with each other for sports rights, 53 00:02:48,880 --> 00:02:49,760 Speaker 3: just as we always have. 54 00:02:50,200 --> 00:02:53,400 Speaker 2: Thursday evening, President Biden made an impromptu appearance at the 55 00:02:53,400 --> 00:02:56,160 Speaker 2: White House to denounce a Special Councils report that had 56 00:02:56,160 --> 00:02:59,520 Speaker 2: said there would be no prosecution for misuse of classified documents, 57 00:02:59,639 --> 00:03:03,160 Speaker 2: but only because no jury would convict an elderly man 58 00:03:03,560 --> 00:03:07,639 Speaker 2: with a poor memory. My memory is fine, my memory. 59 00:03:07,760 --> 00:03:09,800 Speaker 2: Take a look at what I've done since I've become pressive. 60 00:03:10,320 --> 00:03:11,760 Speaker 2: None of you thought I could pass any of the 61 00:03:11,800 --> 00:03:12,760 Speaker 2: things I got passed. 62 00:03:13,000 --> 00:03:13,720 Speaker 9: How'd that happen? 63 00:03:14,520 --> 00:03:14,720 Speaker 10: You know? 64 00:03:14,840 --> 00:03:16,240 Speaker 2: I guess I just forgot. 65 00:03:15,919 --> 00:03:16,480 Speaker 5: What was going on. 66 00:03:18,639 --> 00:03:21,680 Speaker 2: The equity markets responded to an event packed week by 67 00:03:21,680 --> 00:03:24,440 Speaker 2: continuing their march upward with the s and P five hundred, 68 00:03:24,480 --> 00:03:26,720 Speaker 2: adding almost one point four percent to close for the 69 00:03:26,720 --> 00:03:29,920 Speaker 2: first time over five thousand, already putting it over the 70 00:03:29,960 --> 00:03:32,480 Speaker 2: median point for where the bloomberg Els think will end 71 00:03:32,560 --> 00:03:35,120 Speaker 2: up the year. The NAZAC climb two point three percent, 72 00:03:35,240 --> 00:03:37,520 Speaker 2: while the yield on the tenure also rose some fifteen 73 00:03:37,560 --> 00:03:40,120 Speaker 2: basis points to end at one point four point one 74 00:03:40,080 --> 00:03:42,400 Speaker 2: point seven. To give us his read on where these 75 00:03:42,480 --> 00:03:45,920 Speaker 2: equities are headed. We welcome back now, Scott Kroner, City 76 00:03:46,080 --> 00:03:48,320 Speaker 2: US equity strategist. Scott, great to have you back with us. 77 00:03:48,440 --> 00:03:50,480 Speaker 2: So I guess the basic question is have they gone 78 00:03:50,520 --> 00:03:52,960 Speaker 2: far enough? Are we overpriced now in the equity markets? 79 00:03:52,960 --> 00:03:54,160 Speaker 2: Because they really marched. 80 00:03:53,920 --> 00:03:57,520 Speaker 11: Up, I'd say evaluations are certainly getting to a more 81 00:03:57,560 --> 00:04:00,240 Speaker 11: stretched level. What we think this really does those put 82 00:04:00,240 --> 00:04:01,720 Speaker 11: an ongoing burden. 83 00:04:01,360 --> 00:04:02,440 Speaker 12: On a couple of forces. 84 00:04:02,480 --> 00:04:05,320 Speaker 11: First, we do need to see an ongoing tailwind from 85 00:04:05,320 --> 00:04:06,600 Speaker 11: a fundamental perspective. 86 00:04:06,920 --> 00:04:08,000 Speaker 12: Second, we have to keep. 87 00:04:07,840 --> 00:04:10,440 Speaker 11: An eye on ten year yields, which are around the 88 00:04:10,480 --> 00:04:13,560 Speaker 11: four percent level we think send a pretty decent signal 89 00:04:13,560 --> 00:04:14,200 Speaker 11: for equities. 90 00:04:14,400 --> 00:04:15,840 Speaker 12: But at this point it's really. 91 00:04:15,600 --> 00:04:18,520 Speaker 11: The Q four earnings period that we think is supporting 92 00:04:18,520 --> 00:04:20,520 Speaker 11: a lot of the action we've seen thus far, and 93 00:04:20,560 --> 00:04:23,320 Speaker 11: we think of bodes well for the fundamental outlook for 94 00:04:23,360 --> 00:04:25,720 Speaker 11: the SP five hundred over the course of twenty twenty four. 95 00:04:26,000 --> 00:04:28,280 Speaker 2: All the talk in your equity area is about those 96 00:04:28,320 --> 00:04:30,679 Speaker 2: Magnificent seven. However, many I think six ' eight whatever 97 00:04:30,680 --> 00:04:33,760 Speaker 2: they are, magnificent seven, is that likely to broaden out? 98 00:04:33,800 --> 00:04:35,600 Speaker 2: And are they likely to keep marching on? 99 00:04:36,600 --> 00:04:36,920 Speaker 3: Well? 100 00:04:36,960 --> 00:04:40,200 Speaker 12: Okay, so the big seven are magnificent seven? Really is three? 101 00:04:40,279 --> 00:04:41,320 Speaker 12: This year there's three of. 102 00:04:41,279 --> 00:04:44,559 Speaker 11: Those components that have contributed half of the index gained 103 00:04:44,600 --> 00:04:47,200 Speaker 11: year to date. We've been arguing that they become more 104 00:04:47,360 --> 00:04:49,040 Speaker 11: idiosyncratic in their behavior. 105 00:04:49,120 --> 00:04:50,000 Speaker 12: That's unfolding. 106 00:04:50,360 --> 00:04:53,080 Speaker 11: Our big theme, though, has been one of broadening beyond 107 00:04:53,640 --> 00:04:56,880 Speaker 11: the S and p's exposure to just those megacaps, and 108 00:04:56,920 --> 00:04:58,799 Speaker 11: we are seeing evidence of that as well. 109 00:04:58,880 --> 00:05:00,000 Speaker 12: So from our first. 110 00:05:00,000 --> 00:05:05,320 Speaker 11: Active broadening from a fundamental earnings growth perspective is mission 111 00:05:05,360 --> 00:05:08,320 Speaker 11: critical to further upside for the SMP. And what we 112 00:05:08,400 --> 00:05:11,400 Speaker 11: think that does is lend itself to a broadening from 113 00:05:11,440 --> 00:05:15,040 Speaker 11: a performance perspective across a broader array of sectors. 114 00:05:15,240 --> 00:05:17,760 Speaker 2: So you talk about fundamentals, I interpret that as earnings 115 00:05:18,000 --> 00:05:19,720 Speaker 2: and telling me about earnings. Where we are in earnings. 116 00:05:19,760 --> 00:05:22,400 Speaker 2: Where we're headed earnings, I mean, you're you're actually toward 117 00:05:22,480 --> 00:05:25,040 Speaker 2: the top of the Bloomberg elves and your projection for 118 00:05:25,080 --> 00:05:26,520 Speaker 2: where we're going to be earnings this year. 119 00:05:26,800 --> 00:05:29,599 Speaker 11: Yeah, we're pretty bullish on the earnings out look and 120 00:05:29,640 --> 00:05:31,360 Speaker 11: the fundamental picture for the S and B of five 121 00:05:31,440 --> 00:05:33,760 Speaker 11: hundred for sure. And what I would say about that 122 00:05:34,320 --> 00:05:37,440 Speaker 11: is going into the Q four reporting period, which obviously 123 00:05:37,480 --> 00:05:41,120 Speaker 11: sets up for twenty twenty four, expectations had come down 124 00:05:41,160 --> 00:05:44,239 Speaker 11: and so they're being easily exceeded at this point, again 125 00:05:44,279 --> 00:05:45,720 Speaker 11: something that we had expected. 126 00:05:46,000 --> 00:05:48,240 Speaker 12: We had also expected that we'd see a. 127 00:05:48,200 --> 00:05:52,359 Speaker 11: Downward bias to full your twenty twenty four estimates, and 128 00:05:52,520 --> 00:05:55,400 Speaker 11: in fact that had been occurring. But we're now seeing 129 00:05:55,440 --> 00:05:58,440 Speaker 11: some signs of stabilization. We think the path higher for 130 00:05:58,520 --> 00:06:02,800 Speaker 11: equities from here begins with fundamentals, and there we were quite. 131 00:06:02,600 --> 00:06:04,040 Speaker 12: Constructive on the earnings picture. 132 00:06:04,279 --> 00:06:06,320 Speaker 11: We're looking for the S and P earnings growth in 133 00:06:06,360 --> 00:06:08,400 Speaker 11: the twenty twenty four time frame to be in the 134 00:06:08,400 --> 00:06:09,799 Speaker 11: neighborhood of ten to twelve percent. 135 00:06:09,960 --> 00:06:11,160 Speaker 2: When it comes to tech, does a lot to talk 136 00:06:11,160 --> 00:06:13,600 Speaker 2: about AI and its effect on productivity and where we're 137 00:06:13,600 --> 00:06:15,520 Speaker 2: going there. What's your take on a on how it's 138 00:06:15,520 --> 00:06:16,480 Speaker 2: going to affect equities. 139 00:06:17,480 --> 00:06:19,960 Speaker 11: Well, the way we've been viewing it is that it's 140 00:06:19,960 --> 00:06:21,920 Speaker 11: going to affect it in two ways. First, you're going 141 00:06:21,960 --> 00:06:24,159 Speaker 11: to have that subset of companies that has a direct 142 00:06:24,240 --> 00:06:28,599 Speaker 11: beneficiary you can measure either via revenues or earnings. That's 143 00:06:28,640 --> 00:06:31,920 Speaker 11: a small subset of the megacap growth cohort that we've. 144 00:06:31,800 --> 00:06:33,080 Speaker 12: Been discussing already. 145 00:06:33,320 --> 00:06:37,320 Speaker 11: But under the surface, we're looking for AI to lead 146 00:06:37,360 --> 00:06:41,760 Speaker 11: to productivity enhancements across a broader swath of companies. That's 147 00:06:41,760 --> 00:06:44,679 Speaker 11: going to be much harder to get one's hands around 148 00:06:44,839 --> 00:06:47,520 Speaker 11: from a granular perspective, but we expect to see it 149 00:06:47,839 --> 00:06:49,719 Speaker 11: in margins and profitability. 150 00:06:50,040 --> 00:06:51,599 Speaker 2: I'm not sure we call it a fundamental But what 151 00:06:51,600 --> 00:06:54,600 Speaker 2: about the election? I mean I keep hearing that historically 152 00:06:54,960 --> 00:06:57,359 Speaker 2: in years where incumbent presidents are running for re election, 153 00:06:57,640 --> 00:07:00,360 Speaker 2: whether they get, whether they win or lose, the market, Well, 154 00:07:00,480 --> 00:07:01,840 Speaker 2: do you ascribe to that view? 155 00:07:02,400 --> 00:07:02,640 Speaker 3: Yeah? 156 00:07:02,680 --> 00:07:04,920 Speaker 11: I think the way we're approaching this election is you 157 00:07:04,920 --> 00:07:07,599 Speaker 11: can throw out historic playbooks. We don't think that a 158 00:07:07,640 --> 00:07:12,320 Speaker 11: lot of the performance patterns from previous presidential elections will 159 00:07:12,320 --> 00:07:14,840 Speaker 11: hold out this time. We think there is a different 160 00:07:14,880 --> 00:07:17,840 Speaker 11: set of issues that need to be contented with, and 161 00:07:17,960 --> 00:07:20,560 Speaker 11: each of the two candidates, in our view, has some 162 00:07:20,720 --> 00:07:24,200 Speaker 11: aspects of their policy stance that are not particularly a 163 00:07:24,320 --> 00:07:26,400 Speaker 11: US equity friendly, and so we're going to have to 164 00:07:26,480 --> 00:07:30,120 Speaker 11: monitor the way their platforms really fall into place over 165 00:07:30,160 --> 00:07:31,120 Speaker 11: the next several months. 166 00:07:31,200 --> 00:07:33,240 Speaker 2: As in so many elections, risks on both sides, many 167 00:07:33,240 --> 00:07:37,160 Speaker 2: thanks to Scott Kroner of City. It started with private 168 00:07:37,200 --> 00:07:39,800 Speaker 2: equity engineering the leveraged buyout of our Ja and Ebisco 169 00:07:40,080 --> 00:07:43,360 Speaker 2: back in the mid nineteen eighties, but it's gone far 170 00:07:43,480 --> 00:07:47,080 Speaker 2: beyond leverage buyouts and far beyond private equity alone, as 171 00:07:47,120 --> 00:07:50,280 Speaker 2: private credit, real estate infrastructure on a range of alternative 172 00:07:50,280 --> 00:07:54,160 Speaker 2: investment vehicles have blossomed. One of those is six Street Partners, 173 00:07:54,320 --> 00:07:57,280 Speaker 2: now investing some seventy five billion dollars, and we welcome 174 00:07:57,320 --> 00:07:59,840 Speaker 2: its new co cio, Julian Starsbury. 175 00:08:00,000 --> 00:08:02,000 Speaker 13: Welcome back to Wall Street. We're good to have you, Julian, 176 00:08:02,080 --> 00:08:04,160 Speaker 13: great to be here. So tell me about the move 177 00:08:04,280 --> 00:08:07,560 Speaker 13: from Goldman to Six Street Partners. Not so much about 178 00:08:07,560 --> 00:08:09,680 Speaker 13: why you personally did it, but what is it represented 179 00:08:09,720 --> 00:08:13,600 Speaker 13: in your mind about larger trends in Wall Street and investing. 180 00:08:14,080 --> 00:08:16,720 Speaker 4: Yeah, if you go back twenty or thirty years, I 181 00:08:16,720 --> 00:08:21,120 Speaker 4: would say private equity was a relatively niche area. Private 182 00:08:21,160 --> 00:08:26,120 Speaker 4: credit was people didn't really talk about private credit. There 183 00:08:26,160 --> 00:08:30,400 Speaker 4: was middle market lending going on at banks certainly, you know, 184 00:08:30,440 --> 00:08:32,079 Speaker 4: you had hedge funds out there who may do the 185 00:08:32,080 --> 00:08:38,720 Speaker 4: odd private loan here and there. Infrastructure really wasn't, you know, 186 00:08:38,760 --> 00:08:41,120 Speaker 4: on the tip of everybody's tongue. And what you've seen 187 00:08:41,200 --> 00:08:44,800 Speaker 4: is just this gradual trend over the last twenty or 188 00:08:44,880 --> 00:08:47,679 Speaker 4: thirty years. As you saw some of the early moves 189 00:08:47,679 --> 00:08:50,880 Speaker 4: into alternatives back in the eighties and nineties, the endowments 190 00:08:50,920 --> 00:08:55,040 Speaker 4: and the state pension plans, they were generating tremendous returns 191 00:08:55,080 --> 00:08:57,800 Speaker 4: from the asset class. This was giving rise to increased 192 00:08:57,800 --> 00:09:01,760 Speaker 4: allocations towards initially private equity, but then wanting to broaden 193 00:09:01,800 --> 00:09:06,400 Speaker 4: into other diversifiers, and then subsequently that brought in other capital. 194 00:09:06,679 --> 00:09:09,920 Speaker 4: So you've seen like a greater interest in investing in 195 00:09:10,200 --> 00:09:14,520 Speaker 4: private capital, which means the roles for banks has just changed. 196 00:09:14,559 --> 00:09:17,480 Speaker 4: That there's still an incredibly important role for banks to 197 00:09:17,559 --> 00:09:21,360 Speaker 4: play as a financier, as an intermediary, as an advisor 198 00:09:21,400 --> 00:09:24,200 Speaker 4: around these given situations, but actually the retention of the 199 00:09:24,320 --> 00:09:27,240 Speaker 4: risk capital in these deals whether it's owning the private 200 00:09:27,240 --> 00:09:32,079 Speaker 4: equity transaction or owning the you know, the junior debt tranchers, 201 00:09:33,040 --> 00:09:36,000 Speaker 4: owning the real estate asset is increasingly just moving into 202 00:09:36,000 --> 00:09:40,400 Speaker 4: the hands of long dated private capital that typically, if 203 00:09:40,440 --> 00:09:44,560 Speaker 4: structured right, has a liability set which is matched against 204 00:09:44,600 --> 00:09:45,840 Speaker 4: the assets that they're invested in. 205 00:09:45,960 --> 00:09:47,920 Speaker 2: We were a tendency in financial media to talk about 206 00:09:48,000 --> 00:09:52,199 Speaker 2: active investing passive investing. What about active management and passive 207 00:09:52,280 --> 00:09:54,719 Speaker 2: management in this sense? We had Tony James on a 208 00:09:54,720 --> 00:09:56,600 Speaker 2: little while ago and you said, in private agrey, it 209 00:09:56,640 --> 00:09:59,800 Speaker 2: evolves from something that was basically a financial transaction. We'd 210 00:09:59,800 --> 00:10:01,480 Speaker 2: love ridge things up. We can make money, you can 211 00:10:01,520 --> 00:10:04,320 Speaker 2: flip it in privately. Increasingly you have to actually manage 212 00:10:04,320 --> 00:10:07,240 Speaker 2: the business, make some change the business, make it more valuable. 213 00:10:07,280 --> 00:10:09,800 Speaker 2: Are you seeing that with the various vehicles you're looking 214 00:10:09,800 --> 00:10:13,000 Speaker 2: at that you are more involved in the business. 215 00:10:13,280 --> 00:10:13,760 Speaker 3: Absolutely. 216 00:10:13,960 --> 00:10:17,120 Speaker 4: I think about there's a continuum of investments that you 217 00:10:17,160 --> 00:10:20,600 Speaker 4: can make somewhat where which are relatively more passive and 218 00:10:20,679 --> 00:10:24,800 Speaker 4: some that require very active involvement. And one could say, 219 00:10:25,120 --> 00:10:28,720 Speaker 4: you know, building a company from scratch or or scaling 220 00:10:28,760 --> 00:10:32,600 Speaker 4: up a platform control. Private equity being the most active 221 00:10:32,640 --> 00:10:35,480 Speaker 4: form of active management, and there's a continuum in between. 222 00:10:35,720 --> 00:10:37,800 Speaker 4: And I think what you're going to see over time 223 00:10:38,080 --> 00:10:43,040 Speaker 4: is areas where you're simply an intermediary between capital from 224 00:10:43,080 --> 00:10:46,480 Speaker 4: a client going into a situation where it's a relatively 225 00:10:46,559 --> 00:10:51,400 Speaker 4: light touch will be harder to prove value and add value. 226 00:10:51,400 --> 00:10:54,280 Speaker 2: And if you you know, and whereas you. 227 00:10:54,200 --> 00:10:57,400 Speaker 4: Know, the more actively managed situations, you can really demonstrate 228 00:10:57,440 --> 00:11:01,920 Speaker 4: to your clients that you're value to them, but also 229 00:11:02,080 --> 00:11:04,280 Speaker 4: you're a better solution provider to the company that you're 230 00:11:04,440 --> 00:11:05,199 Speaker 4: that you're investing in. 231 00:11:05,440 --> 00:11:07,640 Speaker 2: Given what you said, I'm not going to ask you 232 00:11:07,679 --> 00:11:10,880 Speaker 2: what categories private equity versus private credit for something make 233 00:11:10,920 --> 00:11:12,880 Speaker 2: the most sense, because what you said is it depends 234 00:11:12,920 --> 00:11:16,040 Speaker 2: depends on the problem. We'll use different tools for different purposes. 235 00:11:16,200 --> 00:11:18,079 Speaker 2: What about sectors. One of the things that we're hearing 236 00:11:18,080 --> 00:11:20,199 Speaker 2: a lot about and now, for example, is infrastructure. You've 237 00:11:20,200 --> 00:11:22,600 Speaker 2: seen some big deals now in infrastructure with some other 238 00:11:22,640 --> 00:11:25,800 Speaker 2: investment firms. Is that a real opportunity that you're looking 239 00:11:25,840 --> 00:11:26,800 Speaker 2: at going forward? 240 00:11:27,200 --> 00:11:31,400 Speaker 4: Look, I think it's pretty consensus that there's some like 241 00:11:31,520 --> 00:11:36,199 Speaker 4: big long term themes that everybody's spending time on. I 242 00:11:36,200 --> 00:11:40,160 Speaker 4: would say infrastructure is one of those because that kind 243 00:11:40,160 --> 00:11:43,520 Speaker 4: of ties into a number of themes. Digital transformation of 244 00:11:43,520 --> 00:11:49,280 Speaker 4: the economy, reorienting of the energy infrastructure across the across 245 00:11:49,720 --> 00:11:54,920 Speaker 4: across the globe, decarbonization. I think that the demographic shifts 246 00:11:55,000 --> 00:11:57,720 Speaker 4: and then also the deglobalization trends that we're seeing with 247 00:11:57,760 --> 00:12:02,120 Speaker 4: more businesses wanting to not necessarily exit on mass from 248 00:12:02,200 --> 00:12:07,160 Speaker 4: certain markets, but at least to think more about supply 249 00:12:07,640 --> 00:12:12,120 Speaker 4: chain certainty and security and all of those mega trends 250 00:12:12,200 --> 00:12:15,920 Speaker 4: essentially necessity infrastructure investment, and that will give rise to 251 00:12:16,280 --> 00:12:19,040 Speaker 4: tremendous investment opportunities, trillions of dollars that need to be 252 00:12:19,120 --> 00:12:21,280 Speaker 4: invested in infrastructure in the coming decades. 253 00:12:21,440 --> 00:12:23,320 Speaker 2: Okay, thank you so much. It's really great to have you. 254 00:12:23,360 --> 00:12:23,400 Speaker 10: This. 255 00:12:23,679 --> 00:12:28,920 Speaker 2: That's Julian Salisbury, Six Street Partners coming up anticipating a 256 00:12:29,000 --> 00:12:32,800 Speaker 2: possible Trump rally if he's reelected this fall. We'll talk 257 00:12:32,800 --> 00:12:35,559 Speaker 2: with Scott Vessant of Key Square Capital Management. 258 00:12:36,080 --> 00:12:39,439 Speaker 14: I would say, right now, this is a Nirvana situation 259 00:12:40,000 --> 00:12:40,720 Speaker 14: for the market. 260 00:12:42,320 --> 00:12:44,439 Speaker 2: That's next on Wall Street Week on Bloomberg. 261 00:12:45,920 --> 00:12:50,160 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 262 00:12:50,280 --> 00:12:51,199 Speaker 1: Bloomberg Radio. 263 00:12:56,960 --> 00:12:59,760 Speaker 10: If you look at history, election years are always up heres, 264 00:13:00,120 --> 00:13:02,000 Speaker 10: this is going to be a year where the economy 265 00:13:02,040 --> 00:13:04,320 Speaker 10: medals along. So as Mary said, interest rates are going 266 00:13:04,360 --> 00:13:07,240 Speaker 10: to stay down, stocks are going up, so they're probably, 267 00:13:07,280 --> 00:13:09,000 Speaker 10: in my view, we're going to continue for the balance 268 00:13:09,040 --> 00:13:10,400 Speaker 10: of the year. If you want to worry about something, 269 00:13:10,440 --> 00:13:11,280 Speaker 10: I'd start to worry about. 270 00:13:11,360 --> 00:13:15,920 Speaker 2: Nineteen ninety seven, that was Harvey Eisen of Wright Investors 271 00:13:15,960 --> 00:13:18,760 Speaker 2: Service on Wall Street Week with Lewis Rockeiser, anticipating what 272 00:13:18,800 --> 00:13:21,880 Speaker 2: the presidential election year of nineteen ninety six could mean 273 00:13:21,920 --> 00:13:24,600 Speaker 2: for investors back then. For his thoughts on the twenty 274 00:13:24,600 --> 00:13:27,120 Speaker 2: twenty four election and what it could mean for Wall Street. Today, 275 00:13:27,400 --> 00:13:30,800 Speaker 2: we welcome now Scott's Bessen of Key Square Management. Scott, 276 00:13:30,880 --> 00:13:32,360 Speaker 2: thank you so much for being here. Great to have you. 277 00:13:32,400 --> 00:13:33,400 Speaker 3: Good, thanks for having me. 278 00:13:33,600 --> 00:13:36,720 Speaker 2: So you have looked into this, you have an analysis. Actually, 279 00:13:36,800 --> 00:13:38,880 Speaker 2: you're not just picking things out of the air about 280 00:13:38,880 --> 00:13:40,760 Speaker 2: what you think is going on right now. Let's start 281 00:13:40,800 --> 00:13:43,000 Speaker 2: with a so called Trump rally. We had one last 282 00:13:43,000 --> 00:13:45,520 Speaker 2: time back in twenty sixteen. You think we're in one 283 00:13:45,600 --> 00:13:46,040 Speaker 2: right now. 284 00:13:46,360 --> 00:13:47,720 Speaker 3: We finance people are simple. 285 00:13:48,160 --> 00:13:52,040 Speaker 14: In twenty sixteen, the market crashed on election eve and 286 00:13:52,080 --> 00:13:55,760 Speaker 14: then took off for three four weeks after that, had 287 00:13:55,800 --> 00:14:01,600 Speaker 14: a big run. So you know, Pablovian investors are anchoring 288 00:14:01,720 --> 00:14:06,160 Speaker 14: to November fifth, the twenty twenty four on what a 289 00:14:06,280 --> 00:14:10,319 Speaker 14: Trump win could mean, and you know they're generally market 290 00:14:10,360 --> 00:14:11,400 Speaker 14: friendly policies. 291 00:14:11,840 --> 00:14:13,600 Speaker 2: Well, what are this positives are we talk about taxes 292 00:14:13,640 --> 00:14:14,560 Speaker 2: and regulation mainly. 293 00:14:14,800 --> 00:14:19,880 Speaker 14: Yeah, so the Trump tax cuts expire in the twenty 294 00:14:19,920 --> 00:14:24,760 Speaker 14: twenty five, so presumably those would be reinstated and extended, 295 00:14:25,480 --> 00:14:30,320 Speaker 14: light touch regulation, energy and dependence. And I think the 296 00:14:30,360 --> 00:14:35,240 Speaker 14: market thinks under Trump two that the international situation would 297 00:14:35,240 --> 00:14:35,920 Speaker 14: calm down a bit. 298 00:14:36,240 --> 00:14:39,359 Speaker 2: We'll talk about international situation before you talk about geopolitics. 299 00:14:39,360 --> 00:14:41,600 Speaker 2: What about trade, because we've had him come out now 300 00:14:41,680 --> 00:14:44,240 Speaker 2: and say this is foreign President Trump's saying ten percent 301 00:14:44,280 --> 00:14:47,160 Speaker 2: traffs across the board, and Robert Leithheiser, his advisor's written 302 00:14:47,200 --> 00:14:48,800 Speaker 2: a book that says we'll start at ten percent and 303 00:14:48,800 --> 00:14:51,680 Speaker 2: then just keep ratching it up until we eliminate trade deficits. 304 00:14:51,960 --> 00:14:52,120 Speaker 3: Right. 305 00:14:52,160 --> 00:14:57,360 Speaker 14: Well, I have a contrary view or a differentiated view 306 00:14:57,480 --> 00:15:00,680 Speaker 14: on that. I actually think that they're putting the gun 307 00:15:00,760 --> 00:15:04,000 Speaker 14: on the table with the notion of not having to 308 00:15:04,040 --> 00:15:07,120 Speaker 14: fire it is. You know, that's how you start a negotiation. 309 00:15:07,280 --> 00:15:10,680 Speaker 14: You go to the most extreme position, and the world's 310 00:15:10,800 --> 00:15:14,760 Speaker 14: already falling for it. Christian Leguard came out, President of 311 00:15:14,800 --> 00:15:18,000 Speaker 14: the ECB, came out last week and said, almost assuredly, 312 00:15:18,040 --> 00:15:21,240 Speaker 14: if Donald Trump comes back, he will put terrorists in Europe. 313 00:15:21,440 --> 00:15:25,360 Speaker 14: So without having done anything, he's in a strong negotiating position. 314 00:15:25,600 --> 00:15:27,240 Speaker 2: But do we want tarifts on Europe or is that 315 00:15:27,280 --> 00:15:29,400 Speaker 2: going to hurt our economy? 316 00:15:29,520 --> 00:15:34,120 Speaker 3: We don't know, is so what will terriffs be. 317 00:15:34,320 --> 00:15:40,720 Speaker 14: Tariffs are inflationary, they tend to strengthen the dollar, but 318 00:15:41,280 --> 00:15:44,360 Speaker 14: it is that it's good for domestic industry. 319 00:15:44,880 --> 00:15:48,120 Speaker 2: So you say, the market's discounting the likelihood or quite 320 00:15:48,240 --> 00:15:50,960 Speaker 2: distinct possibility to down trouble come back, and we saw 321 00:15:51,000 --> 00:15:54,480 Speaker 2: it worked well the last time. But also is they 322 00:15:54,600 --> 00:15:55,880 Speaker 2: kind of getting a little bit of help from the 323 00:15:55,880 --> 00:15:56,760 Speaker 2: current administration. 324 00:15:57,120 --> 00:16:01,240 Speaker 14: Well, so my thesis that this is a Trump rally 325 00:16:01,320 --> 00:16:05,320 Speaker 14: is two parts. So market anchoring on Trump is ahead 326 00:16:05,320 --> 00:16:08,880 Speaker 14: in the polls victory November fifth, But Janet Yellen's also 327 00:16:08,920 --> 00:16:11,040 Speaker 14: looking at that Poles, So David. 328 00:16:11,200 --> 00:16:13,000 Speaker 3: Since nineteen fifty. 329 00:16:12,680 --> 00:16:16,360 Speaker 14: Two, the market has never had a down year when 330 00:16:16,400 --> 00:16:19,000 Speaker 14: in accumu's running, never headed down year. 331 00:16:19,520 --> 00:16:20,600 Speaker 3: And why is that? 332 00:16:20,840 --> 00:16:25,760 Speaker 14: Because the economic apparatus in the White House is pumping away, 333 00:16:25,840 --> 00:16:30,280 Speaker 14: so providing a lot of liquidity, spending a lot of money, 334 00:16:30,440 --> 00:16:34,120 Speaker 14: releasing a lot of the programs that were passed last year. 335 00:16:34,480 --> 00:16:36,680 Speaker 14: Maybe they've delayed, so you know, they're trying to reach 336 00:16:36,720 --> 00:16:40,800 Speaker 14: some kind of crescendo this summer, and the market likes that. So, 337 00:16:41,000 --> 00:16:43,320 Speaker 14: you know, I would say right now, this is a 338 00:16:43,440 --> 00:16:46,000 Speaker 14: nirvana situation for the market. 339 00:16:46,320 --> 00:16:48,720 Speaker 3: Trump's ahead in the polls, Marc's. 340 00:16:48,440 --> 00:16:52,120 Speaker 14: Anchoring on November fifth, and Yellen sees the same poles, 341 00:16:52,480 --> 00:16:54,480 Speaker 14: and she's pumping away as hard as she can. 342 00:16:54,600 --> 00:16:56,440 Speaker 2: It's got One of the things I found fascinating your 343 00:16:56,480 --> 00:16:58,880 Speaker 2: note is you have a chart in there that basically 344 00:16:59,040 --> 00:17:01,760 Speaker 2: tracks where the S and P. Five hundred is gaining 345 00:17:01,880 --> 00:17:04,800 Speaker 2: versus where Trump is versus Biden the polls, which is 346 00:17:04,880 --> 00:17:07,680 Speaker 2: pretty stunning. It tends to say the more Trump gets 347 00:17:07,680 --> 00:17:09,560 Speaker 2: ahead in the polls, the better the market does, and 348 00:17:09,600 --> 00:17:12,119 Speaker 2: when Biden gets the poles, it's flat or even a 349 00:17:12,119 --> 00:17:12,760 Speaker 2: little bit down. 350 00:17:13,000 --> 00:17:15,960 Speaker 14: Yeah, so that's correct. You know, I did put the 351 00:17:16,080 --> 00:17:19,560 Speaker 14: normal disclaimers. There are not a lot of episode, not 352 00:17:19,640 --> 00:17:20,920 Speaker 14: a lot of observations. 353 00:17:21,760 --> 00:17:24,320 Speaker 3: You know, there's a lot of serial correlation. 354 00:17:23,920 --> 00:17:28,880 Speaker 14: In there, but directionally, I think it's correct, and the magnitude, 355 00:17:29,280 --> 00:17:33,159 Speaker 14: as you said, is quite big. On periods when Trump 356 00:17:33,240 --> 00:17:36,600 Speaker 14: is up, we've had a cumulative gain of thirty five percent. 357 00:17:36,920 --> 00:17:39,080 Speaker 14: Periods on Biden's up, it's thirty percent. 358 00:17:39,920 --> 00:17:41,640 Speaker 2: Scott, it's really great to have you in Willsherter. Thank 359 00:17:41,640 --> 00:17:44,640 Speaker 2: you so much. That's Scott Bessent of Key Square Management. 360 00:17:45,840 --> 00:17:49,399 Speaker 2: Regional and community banks. They're important to our financial system 361 00:17:49,600 --> 00:17:52,240 Speaker 2: and the United States has more of them than anyone else. 362 00:17:53,000 --> 00:17:56,600 Speaker 15: I think the regional banks are very important, extremely important. 363 00:17:56,680 --> 00:17:59,480 Speaker 15: You know, we have forty five hundred banks, which is 364 00:17:59,480 --> 00:18:02,359 Speaker 15: a lot more than any other country per capita or 365 00:18:02,480 --> 00:18:03,600 Speaker 15: per dollar of GDP. 366 00:18:04,320 --> 00:18:06,960 Speaker 2: As important as they are, regional banks have come under 367 00:18:07,000 --> 00:18:09,879 Speaker 2: pressure in recent days. First we had the effects of 368 00:18:09,920 --> 00:18:12,879 Speaker 2: a dramatic rise in interest rates leading to the closure 369 00:18:12,880 --> 00:18:16,320 Speaker 2: of Silicon Valley Bank, Signature Bank, and First Republic Bank. 370 00:18:16,680 --> 00:18:20,119 Speaker 16: So breaking news late Sunday, the Treasury Department, the Federal Reserve, 371 00:18:20,160 --> 00:18:23,320 Speaker 16: and the FDIC said it will wind down Silicon Valley 372 00:18:23,320 --> 00:18:27,160 Speaker 16: Bank in a way that quote Tom fully protects all deposits. 373 00:18:27,160 --> 00:18:27,560 Speaker 3: As we know. 374 00:18:27,640 --> 00:18:30,360 Speaker 16: The one question everyone was asking themselves over the weekend, 375 00:18:30,680 --> 00:18:32,639 Speaker 16: why do we bank? And do we need to open 376 00:18:32,640 --> 00:18:33,520 Speaker 16: a new account. 377 00:18:33,760 --> 00:18:36,440 Speaker 2: Then came the decline in commercial real estate values, which 378 00:18:36,520 --> 00:18:38,520 Speaker 2: hit regional banks particularly hard. 379 00:18:38,840 --> 00:18:41,720 Speaker 15: Commercial real estate is not a is not a principal 380 00:18:41,800 --> 00:18:45,959 Speaker 15: risk or a major risk for the very large largest banks. 381 00:18:46,560 --> 00:18:50,640 Speaker 15: It is much more for regional and really the smaller 382 00:18:50,640 --> 00:18:54,879 Speaker 15: banks have proportionally much larger exposure to real estate. 383 00:18:55,480 --> 00:18:58,040 Speaker 2: And now we have new capital requirements proposed by the 384 00:18:58,040 --> 00:19:01,480 Speaker 2: Federal Reserve which would extend to reas not covered before 385 00:19:02,000 --> 00:19:04,440 Speaker 2: and that bankers say will curtail lending. 386 00:19:04,720 --> 00:19:07,600 Speaker 17: We have the examinations we have on capital. They do 387 00:19:07,680 --> 00:19:10,400 Speaker 17: impact our ability to drive competition the market and help 388 00:19:10,480 --> 00:19:14,960 Speaker 17: America's businesses grow expand around the world, grow domestically and 389 00:19:15,040 --> 00:19:17,480 Speaker 17: on a level playing field. Is a critical issue here 390 00:19:17,640 --> 00:19:20,240 Speaker 17: is that these rules go through the US banking system 391 00:19:20,280 --> 00:19:23,879 Speaker 17: went from being here relative to the European banking capitalization 392 00:19:24,000 --> 00:19:25,120 Speaker 17: or other countries. 393 00:19:24,840 --> 00:19:28,040 Speaker 2: To hear raising questions about the price will pay for 394 00:19:28,160 --> 00:19:29,639 Speaker 2: higher capital requirements. 395 00:19:30,600 --> 00:19:34,080 Speaker 18: Raising capital requirements spy as much as twenty percent on 396 00:19:34,160 --> 00:19:38,480 Speaker 18: an industry that all participants believe is well capitalized is 397 00:19:38,520 --> 00:19:42,600 Speaker 18: a bad idea in any environment, but it becomes even 398 00:19:42,640 --> 00:19:46,480 Speaker 18: more problematic with economic uncertainty ahead. 399 00:19:47,160 --> 00:19:49,639 Speaker 2: And whether the benefits are worth that price. 400 00:19:50,200 --> 00:19:52,880 Speaker 19: I think capital requirements need to be somewhat higher. 401 00:19:53,119 --> 00:19:53,280 Speaker 2: Now. 402 00:19:53,280 --> 00:19:57,040 Speaker 19: Having said that, I think it's incumbent on the banking 403 00:19:57,080 --> 00:20:01,639 Speaker 19: agencies to dig into those analyzes of optimal capital levels, 404 00:20:01,640 --> 00:20:06,199 Speaker 19: to trade off between financial stability and economic growth, and 405 00:20:06,320 --> 00:20:09,600 Speaker 19: to explain in a way that's accessible not just to 406 00:20:09,720 --> 00:20:14,720 Speaker 19: experts but to the public, why the capital increases are warranted, 407 00:20:19,240 --> 00:20:19,520 Speaker 19: and to. 408 00:20:19,440 --> 00:20:21,280 Speaker 2: Tell us what we think we know about what's going 409 00:20:21,280 --> 00:20:23,479 Speaker 2: on with regional banks as well as those proposed new 410 00:20:23,520 --> 00:20:26,320 Speaker 2: capital cords. We welcome back to Wall Street Week Shila Beert. 411 00:20:26,400 --> 00:20:28,840 Speaker 2: She's the former head of the fdi C. Sheila, thank 412 00:20:28,880 --> 00:20:30,960 Speaker 2: you so much for being back on Wall Street Week. 413 00:20:31,119 --> 00:20:33,159 Speaker 2: Let's start with New York Community Bank. Much in the 414 00:20:33,200 --> 00:20:35,400 Speaker 2: news this week. What do we think we know about 415 00:20:35,400 --> 00:20:37,399 Speaker 2: what happened there and is it a one off? Do 416 00:20:37,440 --> 00:20:39,680 Speaker 2: we think or does it say something more broadly about 417 00:20:39,720 --> 00:20:40,480 Speaker 2: regional banks? 418 00:20:40,680 --> 00:20:42,880 Speaker 5: Well, now, I think it says something about the commercial 419 00:20:42,880 --> 00:20:47,400 Speaker 5: real estate markets, especially in urban areas. Office commercial real 420 00:20:47,480 --> 00:20:50,639 Speaker 5: estate and urban areas is suffering a lot of it. 421 00:20:51,119 --> 00:20:53,239 Speaker 5: Some of it's interest rate, some of us just their 422 00:20:53,400 --> 00:20:57,040 Speaker 5: transition to remote work and hybrid work is reducing demand 423 00:20:57,040 --> 00:21:00,720 Speaker 5: for office space and creating high vacancy rates stress. 424 00:21:00,440 --> 00:21:01,320 Speaker 9: For the landlords. 425 00:21:02,240 --> 00:21:04,399 Speaker 5: So and then if they have to refinance about it. 426 00:21:04,440 --> 00:21:06,040 Speaker 5: I think you know about to have a train is 427 00:21:06,080 --> 00:21:09,000 Speaker 5: refinancing this year, I mean after refinance at higher rates. 428 00:21:09,040 --> 00:21:10,959 Speaker 9: So that's what's going on. 429 00:21:11,040 --> 00:21:13,639 Speaker 5: It's really more about commercial real estate than New York 430 00:21:13,680 --> 00:21:18,920 Speaker 5: Community Bank. They do have significant exposure, you know. Uh, 431 00:21:19,480 --> 00:21:21,480 Speaker 5: it seems to me they were under reserved. They had 432 00:21:21,520 --> 00:21:24,359 Speaker 5: they added a lot of a lot of to the 433 00:21:24,440 --> 00:21:28,119 Speaker 5: reserves in the most recent financials, which is a concern. 434 00:21:27,760 --> 00:21:29,359 Speaker 9: But hopefully they've got it covered now. 435 00:21:30,000 --> 00:21:32,879 Speaker 5: You know, we change the rules a while back to 436 00:21:33,119 --> 00:21:37,879 Speaker 5: require banks to reserve against expected losses on their loans 437 00:21:37,920 --> 00:21:40,479 Speaker 5: based on a forward looking through the cycle, looking at 438 00:21:40,520 --> 00:21:41,760 Speaker 5: all market conditions. 439 00:21:42,359 --> 00:21:42,560 Speaker 15: Uh. 440 00:21:42,640 --> 00:21:44,640 Speaker 5: In the FD I see put some really good guidance 441 00:21:44,720 --> 00:21:48,399 Speaker 5: out about this last year, reminding banks that they're supposed 442 00:21:48,400 --> 00:21:51,359 Speaker 5: to be looking at all market conditions, not just historical performance, 443 00:21:51,960 --> 00:21:54,199 Speaker 5: which is pretty good. But historically you didn't have this 444 00:21:54,320 --> 00:21:56,000 Speaker 5: problem with remote and hybrid work. 445 00:21:56,119 --> 00:21:59,560 Speaker 9: So uh, you know, other bags may be under reserve. 446 00:22:00,040 --> 00:22:02,000 Speaker 5: They'll need to get those reserves up, and that's going 447 00:22:02,040 --> 00:22:05,640 Speaker 5: to cut into earnings, but hopefully that plus their capital 448 00:22:05,640 --> 00:22:07,280 Speaker 5: base will be sufficient to get them through this. 449 00:22:08,000 --> 00:22:10,320 Speaker 2: Give us your sense about those capital requirements on how 450 00:22:10,359 --> 00:22:13,240 Speaker 2: they would affect the banks, although things I've read suggested 451 00:22:13,359 --> 00:22:15,240 Speaker 2: really falls more on some of the regional banks that 452 00:22:15,280 --> 00:22:16,160 Speaker 2: on the very big ones. 453 00:22:17,119 --> 00:22:21,560 Speaker 5: Yeah, well, actually the bulk of the capital increases would 454 00:22:21,600 --> 00:22:23,080 Speaker 5: fall on the largest banks. 455 00:22:23,280 --> 00:22:25,960 Speaker 2: They already said that the largest banks already have enough reserves, right, 456 00:22:25,960 --> 00:22:27,840 Speaker 2: that they already have enough capital, That's what I've read. 457 00:22:28,080 --> 00:22:32,720 Speaker 5: Well, so it will increase their regulatory minimum capital requirements 458 00:22:34,200 --> 00:22:36,600 Speaker 5: for the fossil three D end game. That still will 459 00:22:36,640 --> 00:22:38,560 Speaker 5: primarily impact the largest banks. 460 00:22:38,560 --> 00:22:41,600 Speaker 9: And I'm glad you asked this because those rules. 461 00:22:41,640 --> 00:22:45,600 Speaker 5: Really the up of those rules was the Great Financial Crisis, 462 00:22:46,080 --> 00:22:50,480 Speaker 5: and their primary impact is on market risk and operational risk, 463 00:22:50,880 --> 00:22:53,680 Speaker 5: not so much credit risk, which is what we're getting 464 00:22:53,680 --> 00:22:55,600 Speaker 5: into now with commercial real estate. 465 00:22:55,760 --> 00:22:59,840 Speaker 9: So there will be impacts on the regional banks. 466 00:23:00,119 --> 00:23:03,520 Speaker 5: Do lower the higher capital requirements to one hundred and 467 00:23:03,520 --> 00:23:07,199 Speaker 5: billion and about from two fifty, so the assets going 468 00:23:07,240 --> 00:23:09,800 Speaker 5: to have an impact, But there's a very the ficial 469 00:23:09,880 --> 00:23:12,680 Speaker 5: those rules are far from being finalized and it'll be 470 00:23:12,800 --> 00:23:15,800 Speaker 5: many many years before they actually come into effect. When 471 00:23:15,800 --> 00:23:18,480 Speaker 5: they do, so, I think it convestors are ever reacting 472 00:23:18,960 --> 00:23:21,200 Speaker 5: to the prospect of those rules. Now there is no 473 00:23:21,359 --> 00:23:23,280 Speaker 5: not going to be really for better words, there's not 474 00:23:23,280 --> 00:23:25,240 Speaker 5: going to be any real immediate impact. 475 00:23:25,520 --> 00:23:28,040 Speaker 9: On these banks. Is a very long transition period for them, 476 00:23:28,040 --> 00:23:30,199 Speaker 9: and again most of it is actually falling on the. 477 00:23:30,760 --> 00:23:34,560 Speaker 5: Largest banks, especially ones with big investment training operations. 478 00:23:34,960 --> 00:23:37,280 Speaker 2: And the banking industry doesn't seem to like what's been 479 00:23:37,320 --> 00:23:39,600 Speaker 2: proposed so far. I think it's very safe, for sure, 480 00:23:39,840 --> 00:23:42,800 Speaker 2: not a big surprise, and they push back hard, but 481 00:23:43,440 --> 00:23:45,639 Speaker 2: they have from where you say, do they have a 482 00:23:45,640 --> 00:23:48,000 Speaker 2: point because one of the claims is it's going beyond 483 00:23:48,000 --> 00:23:49,600 Speaker 2: what BOSL three actually requires. 484 00:23:50,000 --> 00:23:52,880 Speaker 5: There are many things about this proposed rules I don't 485 00:23:52,920 --> 00:23:57,480 Speaker 5: agree with, and so I think they have legitimate arguments 486 00:23:57,480 --> 00:24:01,680 Speaker 5: on certain aspects of the rules. Issue is around complexity, 487 00:24:02,320 --> 00:24:05,240 Speaker 5: but just I mean, what they're really just saying. Their 488 00:24:05,320 --> 00:24:08,359 Speaker 5: raw argument is any increase in capital is bad and 489 00:24:08,359 --> 00:24:09,320 Speaker 5: it's going to hurt. 490 00:24:09,400 --> 00:24:11,399 Speaker 9: Some main street et cetera. 491 00:24:11,640 --> 00:24:14,160 Speaker 5: And there, you know, they raise a lot of false 492 00:24:14,240 --> 00:24:17,040 Speaker 5: arguments We've heard over and over again. The common one 493 00:24:17,240 --> 00:24:18,919 Speaker 5: is that it's going to hurt lending, it's going to 494 00:24:18,920 --> 00:24:22,840 Speaker 5: constrain lending. First of all, these rules primarily impact trading 495 00:24:22,880 --> 00:24:28,320 Speaker 5: operations and opera trading and operations, not lending. Actually in 496 00:24:28,359 --> 00:24:30,680 Speaker 5: aggregate capital, pharmas go down a little bit under those 497 00:24:30,680 --> 00:24:34,400 Speaker 5: proposed rules were so called credit risks. So and even 498 00:24:34,440 --> 00:24:37,080 Speaker 5: if that was true, we all capitalized banks do a 499 00:24:37,119 --> 00:24:39,080 Speaker 5: better job of blending through the cycle. 500 00:24:39,119 --> 00:24:40,680 Speaker 9: You want them to be resilient enough. 501 00:24:41,520 --> 00:24:43,399 Speaker 5: We've been talking about the situation we have now with 502 00:24:43,400 --> 00:24:46,600 Speaker 5: commercial real estate. This is going to create more increased 503 00:24:46,600 --> 00:24:49,399 Speaker 5: credit losses on the banking system, and large banks have 504 00:24:49,480 --> 00:24:52,560 Speaker 5: some exposure here. Two Also, as you know, as monetary 505 00:24:52,640 --> 00:24:57,680 Speaker 5: policy titans, again, you have market law inflated asset valuations adjust, 506 00:24:58,160 --> 00:25:01,800 Speaker 5: low yielding assets lose marketa So when we get to 507 00:25:01,880 --> 00:25:05,520 Speaker 5: these cycles and of monetary tightening, we talk about a 508 00:25:05,600 --> 00:25:09,520 Speaker 5: hard landing. But the way you avoid a hard landing 509 00:25:09,560 --> 00:25:11,720 Speaker 5: is to make sure that the banking system has enough 510 00:25:11,760 --> 00:25:15,200 Speaker 5: capital to absorb the kinds of losses we're seeing right 511 00:25:15,240 --> 00:25:17,480 Speaker 5: now at which time with monetary tightening. 512 00:25:18,200 --> 00:25:20,080 Speaker 2: Chilla, thank you so much for being back on Wallshers 513 00:25:20,080 --> 00:25:22,000 Speaker 2: are always great to have you. That's Shila Beart. She 514 00:25:22,119 --> 00:25:27,520 Speaker 2: is the former chair of the FDIC. Coming up, Private 515 00:25:27,520 --> 00:25:30,719 Speaker 2: Equity seeks to Breathe New Life. In the book publishing business. 516 00:25:30,960 --> 00:25:33,560 Speaker 2: We talk with Pete, staffers of KKR and Simon and 517 00:25:33,600 --> 00:25:35,440 Speaker 2: Schuster CEO Jonathan Carp. 518 00:25:36,320 --> 00:25:40,120 Speaker 7: What's possible if we become the destination of choice for editors. 519 00:25:40,280 --> 00:25:42,520 Speaker 6: It is a tracking more town. Already we've already been 520 00:25:42,520 --> 00:25:44,840 Speaker 6: able to hire marquee editors. 521 00:25:45,480 --> 00:25:47,520 Speaker 2: That's next on Wall Street Week on Bloomberg. 522 00:25:49,600 --> 00:25:53,800 Speaker 1: This is Bloomberg Well Street Week with David Weston from 523 00:25:53,920 --> 00:25:54,879 Speaker 1: Bloomberg Radio. 524 00:26:01,720 --> 00:26:04,640 Speaker 2: This is Wall Street Week. I'm David western Iconic publishing 525 00:26:04,640 --> 00:26:07,440 Speaker 2: house has changed hands as Simon and Schuster has been 526 00:26:07,440 --> 00:26:09,800 Speaker 2: bought by KKR. And we're joined now by the two 527 00:26:09,800 --> 00:26:13,000 Speaker 2: individuals who've driven this deal. They are the president of 528 00:26:13,000 --> 00:26:15,720 Speaker 2: the CEO of Simon Schuster he is Jonathan Carp, and 529 00:26:15,960 --> 00:26:20,560 Speaker 2: by our friend and colleague from k Pete Stavros. So. Pete, welcome, 530 00:26:20,640 --> 00:26:22,080 Speaker 2: Thank you for having me. Great to have you back, 531 00:26:22,080 --> 00:26:23,440 Speaker 2: and great to have you here. Jonathan. 532 00:26:23,520 --> 00:26:23,840 Speaker 6: Thanks. 533 00:26:23,960 --> 00:26:25,879 Speaker 2: So Pete, let me start with you. We've talked to 534 00:26:25,880 --> 00:26:29,240 Speaker 2: you about KKR's theory about acquisitions at this point, explain 535 00:26:29,280 --> 00:26:31,560 Speaker 2: why you picked book publishing because there's a lot of 536 00:26:31,600 --> 00:26:33,600 Speaker 2: people think that that's not a great business. It's a 537 00:26:33,680 --> 00:26:37,480 Speaker 2: wonderful thing, but it's not necessarily a great growth business, so. 538 00:26:37,560 --> 00:26:40,600 Speaker 7: It's more stable than you might think. So book publishing, 539 00:26:40,600 --> 00:26:43,520 Speaker 7: the volumes are stable, and they've survived the Internet. They've 540 00:26:43,560 --> 00:26:47,000 Speaker 7: survived mobile in a way that a lot of old 541 00:26:47,080 --> 00:26:50,840 Speaker 7: line media businesses have not in industries have not. If 542 00:26:50,840 --> 00:26:53,280 Speaker 7: you look at their content library at Simon and Schuster 543 00:26:53,640 --> 00:26:56,439 Speaker 7: company's been around one hundred years, They've published everything from 544 00:26:56,480 --> 00:26:58,159 Speaker 7: The Great Gas b to Catch twenty two, it's you 545 00:26:58,280 --> 00:27:01,600 Speaker 7: could not replace their content library. And now on top 546 00:27:01,640 --> 00:27:03,959 Speaker 7: of that, what gets us excited is it was this 547 00:27:04,200 --> 00:27:07,240 Speaker 7: unloved gem of a business inside of Paramount, so it 548 00:27:07,280 --> 00:27:09,280 Speaker 7: did not get an investment, it did not get a 549 00:27:09,280 --> 00:27:11,480 Speaker 7: lot of attention, and so we looked at it and 550 00:27:11,480 --> 00:27:14,920 Speaker 7: we said, well, could they do more with audiobooks? What 551 00:27:14,960 --> 00:27:17,159 Speaker 7: type of operational improvements could there be? You know, Jonathan 552 00:27:17,160 --> 00:27:20,159 Speaker 7: and I have talked about this. Forecasting demand for a 553 00:27:20,240 --> 00:27:22,680 Speaker 7: new book is really hard. How many copies of that 554 00:27:22,720 --> 00:27:24,880 Speaker 7: book are going to be sold is very difficult to predict. 555 00:27:25,400 --> 00:27:27,280 Speaker 7: We think there's ways to do bring a little more 556 00:27:27,280 --> 00:27:30,200 Speaker 7: science to that, and also to shrink our supply chain 557 00:27:30,240 --> 00:27:33,359 Speaker 7: and be more responsive so we're not producing excess books 558 00:27:33,359 --> 00:27:37,240 Speaker 7: that end up getting thrown out employee engagement. There's sixteen 559 00:27:37,280 --> 00:27:40,600 Speaker 7: hundred and fifty employees at the company, fewer than five 560 00:27:40,600 --> 00:27:42,920 Speaker 7: percent head ownership in the company, which is something we're 561 00:27:42,920 --> 00:27:45,400 Speaker 7: going to bring to the table around employee engagement and ownership. 562 00:27:45,600 --> 00:27:48,679 Speaker 7: You know, what's possible if we become the destination of 563 00:27:48,760 --> 00:27:51,760 Speaker 7: choice for editors, you know, who are effectively talent agents 564 00:27:51,760 --> 00:27:53,440 Speaker 7: for authors. So then we're going to be the destination 565 00:27:53,480 --> 00:27:56,400 Speaker 7: of choice for authors. And what this could all unleash 566 00:27:56,440 --> 00:28:00,000 Speaker 7: in now being the only standalone book publishing company out there, 567 00:28:00,160 --> 00:28:01,200 Speaker 7: This could be a big deal. 568 00:28:01,359 --> 00:28:03,359 Speaker 2: So, Jonathan, what about from your side, from Simon and 569 00:28:03,359 --> 00:28:06,359 Speaker 2: Schuster side of it, what does KKR potentially bring to 570 00:28:06,359 --> 00:28:08,480 Speaker 2: the tables? K said, they don't want to start picking 571 00:28:08,480 --> 00:28:09,720 Speaker 2: the books, they don't want to do your job. 572 00:28:10,520 --> 00:28:13,240 Speaker 6: Well, I mean, first of all, the idea of giving 573 00:28:13,520 --> 00:28:15,480 Speaker 6: all of the employees a piece of the action, This 574 00:28:15,600 --> 00:28:19,520 Speaker 6: idea of broad based ownership has really energized a company, 575 00:28:20,000 --> 00:28:22,360 Speaker 6: and I think it's got all of us rowing together, 576 00:28:23,000 --> 00:28:25,359 Speaker 6: and I think it was it was a jolt of 577 00:28:25,400 --> 00:28:28,080 Speaker 6: excitement that went through the company when this was announced. 578 00:28:28,640 --> 00:28:29,960 Speaker 2: And you know, I really. 579 00:28:29,760 --> 00:28:33,520 Speaker 6: Credit Pee with with you know, being an advocate and 580 00:28:33,560 --> 00:28:38,120 Speaker 6: an evangelist, for this idea because it is attracting more talent. Already, 581 00:28:38,120 --> 00:28:42,640 Speaker 6: We've already been able to hire some marquee editors, and 582 00:28:43,200 --> 00:28:45,080 Speaker 6: as Pete said, I mean those editors are going to 583 00:28:45,120 --> 00:28:46,080 Speaker 6: attract the authors. 584 00:28:46,520 --> 00:28:49,120 Speaker 2: Well, explain that part of the business exactly. I mean 585 00:28:49,360 --> 00:28:51,320 Speaker 2: they want to work harder because they have a piece 586 00:28:51,360 --> 00:28:53,840 Speaker 2: of the action. Now, if you get those market editors, 587 00:28:53,880 --> 00:28:55,760 Speaker 2: does that bring in authors that will give you hits? 588 00:28:55,760 --> 00:28:58,560 Speaker 2: Because my understanding is it is still a hit driven business. 589 00:28:59,000 --> 00:29:01,560 Speaker 6: Well, it is a hit driven business on the front list, 590 00:29:01,600 --> 00:29:04,200 Speaker 6: but now about half of our sales are coming from 591 00:29:04,280 --> 00:29:07,560 Speaker 6: backlist books that have been out for more than a year, 592 00:29:08,240 --> 00:29:11,400 Speaker 6: and so you want the best editors to attract the 593 00:29:11,400 --> 00:29:13,960 Speaker 6: books that are going to last, and the books that 594 00:29:14,000 --> 00:29:17,680 Speaker 6: are lasting are easier and easier to sell because of 595 00:29:17,760 --> 00:29:21,360 Speaker 6: digital marketing. So it's actually a much better business than 596 00:29:21,400 --> 00:29:25,360 Speaker 6: it's ever been because we can instantly sell books through 597 00:29:25,360 --> 00:29:28,440 Speaker 6: ebooks or through audio. The other part of the business 598 00:29:28,520 --> 00:29:33,400 Speaker 6: that's really really exciting right now is audiobooks because Spotify's 599 00:29:33,400 --> 00:29:35,760 Speaker 6: gotten into the business. Of course, Audible and Apple are 600 00:29:35,800 --> 00:29:40,200 Speaker 6: already there, but with Spotify getting into the market, our 601 00:29:40,240 --> 00:29:43,360 Speaker 6: books are reaching an entirely different audience, and when you 602 00:29:43,400 --> 00:29:46,120 Speaker 6: think about it, only about half of the people in 603 00:29:46,160 --> 00:29:49,080 Speaker 6: the country will buy a book in a year. But 604 00:29:49,160 --> 00:29:52,160 Speaker 6: the people who are listening to Spotify, they may be 605 00:29:52,440 --> 00:29:54,440 Speaker 6: music listeners and they may just be people who aren't 606 00:29:54,480 --> 00:29:57,440 Speaker 6: really into the habit of reading. Last year, when we 607 00:29:57,480 --> 00:30:03,120 Speaker 6: published the Britney Spears Memoir, we set records on Spotify 608 00:30:03,880 --> 00:30:07,760 Speaker 6: and we've sold over a million audio books of Britney Spears. 609 00:30:08,160 --> 00:30:10,479 Speaker 6: So that's a very exciting development for the business. 610 00:30:10,760 --> 00:30:12,960 Speaker 2: So you talked about the catalog before, and I was 611 00:30:13,000 --> 00:30:15,440 Speaker 2: wondering ways to exploit the pathology. It sounds like part 612 00:30:15,480 --> 00:30:18,440 Speaker 2: of it is new outlets, essentially new forms of media. 613 00:30:18,520 --> 00:30:20,000 Speaker 2: What are the margins on that though? When you go 614 00:30:20,040 --> 00:30:21,760 Speaker 2: to a Spotify so you can't make as much money 615 00:30:21,760 --> 00:30:23,040 Speaker 2: off of that as you do off a book. I 616 00:30:23,080 --> 00:30:25,800 Speaker 2: assume I don't think we want to talk about that. 617 00:30:26,080 --> 00:30:27,520 Speaker 6: Yeah, I'm not going to talk about the margins, but 618 00:30:27,560 --> 00:30:32,320 Speaker 6: I mean, but the distribution is frictionless, so there are 619 00:30:32,360 --> 00:30:34,800 Speaker 6: no returns with audio books and there are no returns 620 00:30:34,800 --> 00:30:37,080 Speaker 6: with ebooks. So it's a better way of getting books 621 00:30:37,080 --> 00:30:39,760 Speaker 6: out there to the public. And it's also instant. You're 622 00:30:39,760 --> 00:30:41,320 Speaker 6: always going to be able to find it if you're 623 00:30:41,360 --> 00:30:43,680 Speaker 6: searching for a digitally, that's certainly not as true when 624 00:30:43,880 --> 00:30:45,200 Speaker 6: you go to your local bookstore. 625 00:30:45,720 --> 00:30:48,280 Speaker 2: That's fascinating AI. We've talked about AI before. How does 626 00:30:48,320 --> 00:30:49,360 Speaker 2: that help you with publishing? 627 00:30:50,120 --> 00:30:52,920 Speaker 7: Well, it could be a tool to make authors and 628 00:30:53,080 --> 00:30:55,320 Speaker 7: editors more productive. I mean, just to be clear, what's 629 00:30:55,360 --> 00:30:56,600 Speaker 7: not going to happen is we're not going to go 630 00:30:56,640 --> 00:30:59,200 Speaker 7: start writing books with AI. That's something we talked about 631 00:30:59,240 --> 00:31:01,360 Speaker 7: on the front end. It could be a productivity tool. 632 00:31:02,040 --> 00:31:04,760 Speaker 7: There's so much that's unknown, so we don't know exactly 633 00:31:04,800 --> 00:31:07,200 Speaker 7: how it might help us be more productive in the future, 634 00:31:07,200 --> 00:31:08,680 Speaker 7: but it's something we're thinking about in study. 635 00:31:08,800 --> 00:31:10,120 Speaker 2: It strikes me this is the first time, I think 636 00:31:10,160 --> 00:31:12,920 Speaker 2: since nineteen seventy five Simon Tusher was not owned by 637 00:31:13,040 --> 00:31:15,200 Speaker 2: a conglomerate, I mean, going all the way back to 638 00:31:15,240 --> 00:31:19,520 Speaker 2: Gulf and Western I believe. How does that change your orientation, Jonathan, 639 00:31:19,560 --> 00:31:21,400 Speaker 2: now that you have somebody who's really focused on book 640 00:31:21,400 --> 00:31:24,240 Speaker 2: publishing rather than focusing on a lawful lot of other businesses. 641 00:31:24,480 --> 00:31:26,680 Speaker 6: Well, it is true that KKR is going to allow 642 00:31:26,760 --> 00:31:29,360 Speaker 6: us to invest more in our own business. So there 643 00:31:29,400 --> 00:31:32,120 Speaker 6: are there are several engines that drive our growth one 644 00:31:32,160 --> 00:31:35,920 Speaker 6: of them obviously PU the adult the adult books, but 645 00:31:36,080 --> 00:31:42,560 Speaker 6: also children's books, audio, UH international, and distribution. We actually 646 00:31:42,600 --> 00:31:46,280 Speaker 6: distribute books from many other smaller publishers. So those are 647 00:31:46,320 --> 00:31:49,640 Speaker 6: our five engines of growth. And KKR is going to 648 00:31:49,680 --> 00:31:53,280 Speaker 6: allow us to invest more in our international distribution and 649 00:31:53,800 --> 00:31:56,440 Speaker 6: more in attracting other clients to distribute. 650 00:31:56,800 --> 00:31:59,720 Speaker 2: Is there more transparency now for people at shows about 651 00:31:59,720 --> 00:32:02,520 Speaker 2: how they're business works, about what they're contributing to it, 652 00:32:02,560 --> 00:32:04,480 Speaker 2: and whether you're succeeding or not succeeding. 653 00:32:04,600 --> 00:32:09,440 Speaker 6: Absolutely. We are having quarterly shareholder meetings now. And I 654 00:32:09,480 --> 00:32:13,800 Speaker 6: have to say, before KKR bought us, I was called 655 00:32:13,840 --> 00:32:17,840 Speaker 6: into a meeting with to the principles at R, Richard 656 00:32:17,880 --> 00:32:21,000 Speaker 6: Sarnoff and Ted Oberwager, And before they bought us, they 657 00:32:21,040 --> 00:32:24,280 Speaker 6: wanted to make sure that I was on board with 658 00:32:24,360 --> 00:32:27,960 Speaker 6: the idea of broad based ownership, and they set up 659 00:32:27,960 --> 00:32:30,200 Speaker 6: a whole special meeting just to talk to me about this, 660 00:32:30,280 --> 00:32:33,640 Speaker 6: and I was actually quite surprised. I was incredulous actually 661 00:32:33,680 --> 00:32:36,480 Speaker 6: that they would think that any CEO would be opposed 662 00:32:36,480 --> 00:32:39,920 Speaker 6: to such a thing. But they said that it is 663 00:32:39,960 --> 00:32:42,640 Speaker 6: a lot of work and you have to really communicate 664 00:32:43,440 --> 00:32:46,640 Speaker 6: with the employees and explain all this to them, and 665 00:32:46,680 --> 00:32:48,720 Speaker 6: it actually has been a fair amount of work, but 666 00:32:48,920 --> 00:32:51,760 Speaker 6: worth it every step of the way. And I really 667 00:32:51,760 --> 00:32:55,840 Speaker 6: do think that it has really changed changed the tone 668 00:32:55,840 --> 00:32:56,560 Speaker 6: at this company. 669 00:32:57,400 --> 00:33:00,280 Speaker 7: The pushback we sometimes get from executive Certainly we didn't 670 00:33:00,280 --> 00:33:02,640 Speaker 7: get this from Jonathan, but sometimes people just say, I'm 671 00:33:02,680 --> 00:33:05,680 Speaker 7: so overwhelmed with priorities. You know, I already heard you 672 00:33:05,680 --> 00:33:07,960 Speaker 7: want us to double our earnings. You want our financials 673 00:33:07,960 --> 00:33:10,480 Speaker 7: by the fifteenth of the month. We want us to 674 00:33:10,560 --> 00:33:13,440 Speaker 7: decarbonize ad diversity, and on and on and on, and 675 00:33:13,480 --> 00:33:17,080 Speaker 7: now you want me to teach financial literacy, drive employee engagement, 676 00:33:17,120 --> 00:33:17,920 Speaker 7: make everyone an owner. 677 00:33:18,080 --> 00:33:19,600 Speaker 2: I just can't do it all. 678 00:33:19,680 --> 00:33:22,920 Speaker 7: And the unlock, and Jonathan got there way earlier than 679 00:33:22,920 --> 00:33:25,400 Speaker 7: many others. The unlock is if you do those last 680 00:33:25,400 --> 00:33:27,960 Speaker 7: few things well, then everything else that came before it 681 00:33:27,960 --> 00:33:29,560 Speaker 7: is a lot easier. If you've got a more stable 682 00:33:29,640 --> 00:33:32,480 Speaker 7: workforce that's more engaged on the job, has a stake 683 00:33:32,520 --> 00:33:35,040 Speaker 7: in the outcome, all the other operational initiations are going 684 00:33:35,080 --> 00:33:35,920 Speaker 7: to be easier to accomplish. 685 00:33:35,960 --> 00:33:37,680 Speaker 2: Do you have a time horizon in your head at 686 00:33:37,720 --> 00:33:40,920 Speaker 2: KKR about how long you're likely to hold us. We're 687 00:33:40,920 --> 00:33:41,520 Speaker 2: not in a hurry. 688 00:33:41,720 --> 00:33:45,400 Speaker 7: So I would say KKR is distinguished in taking our time. 689 00:33:45,440 --> 00:33:48,920 Speaker 7: We've owned businesses for twenty years before it takes as 690 00:33:48,960 --> 00:33:52,280 Speaker 7: long as it takes. Our base case would be this is, 691 00:33:52,400 --> 00:33:54,760 Speaker 7: you know, five, six seven years. We've got a bunch 692 00:33:54,760 --> 00:33:57,760 Speaker 7: of things we want to accomplish. Maybe it becomes a 693 00:33:57,760 --> 00:34:00,520 Speaker 7: great public company someday we'll see, but we're not in 694 00:34:00,600 --> 00:34:00,960 Speaker 7: a hurry. 695 00:34:01,400 --> 00:34:04,720 Speaker 2: So fut six seven years, maybe longer over that course. 696 00:34:04,800 --> 00:34:07,160 Speaker 2: I mean, there are things you'll do behind the scenes, Jonathan, 697 00:34:07,200 --> 00:34:09,120 Speaker 2: to improve things. What about in terms of the books 698 00:34:09,160 --> 00:34:11,759 Speaker 2: you publish. What are the categories that you're looking at 699 00:34:11,800 --> 00:34:14,000 Speaker 2: right now that you think are growth categories in terms 700 00:34:14,080 --> 00:34:15,280 Speaker 2: of attractiveness of books. 701 00:34:15,880 --> 00:34:20,880 Speaker 6: Well, we're getting into the Latino market more. Obviously, almost 702 00:34:20,880 --> 00:34:24,840 Speaker 6: twenty percent of the American public is from the Latin 703 00:34:24,840 --> 00:34:29,640 Speaker 6: American background, and that audience hasn't really been reached very 704 00:34:29,640 --> 00:34:32,759 Speaker 6: well by book publishers, So that's a big one. We're 705 00:34:32,760 --> 00:34:35,520 Speaker 6: getting more into science fiction and fantasy. We hadn't really 706 00:34:35,520 --> 00:34:37,960 Speaker 6: been publishing very many books in that category for some reason. 707 00:34:38,320 --> 00:34:40,359 Speaker 6: We want to be publishing more business books on an 708 00:34:40,360 --> 00:34:43,080 Speaker 6: international level. I mean, there are so many categories that 709 00:34:43,120 --> 00:34:44,320 Speaker 6: we're not in right now. 710 00:34:44,640 --> 00:34:47,200 Speaker 2: Okay, thank you so much, Jonathan Kark of Simon Schuster 711 00:34:47,320 --> 00:34:52,240 Speaker 2: and pet Saboroughs of KKR. Finally, one more thought. Former 712 00:34:52,320 --> 00:34:56,000 Speaker 2: World Bank President Paul wolf Woods once said about firing employees, 713 00:34:56,239 --> 00:34:59,960 Speaker 2: that's unfortunately part of doing business. And there's a lot 714 00:35:00,040 --> 00:35:02,400 Speaker 2: lot of that sort of business being done these days. 715 00:35:02,800 --> 00:35:05,640 Speaker 2: Just ask the three thousand people being laid off at Esday. 716 00:35:05,440 --> 00:35:08,680 Speaker 20: Lauder cutting as much as three thousand positions we talk about. 717 00:35:08,680 --> 00:35:10,600 Speaker 20: We continue to see job cuts. This is part of 718 00:35:10,600 --> 00:35:12,680 Speaker 20: a restructuring plan to put one of the world's largest 719 00:35:12,680 --> 00:35:15,719 Speaker 20: beauty companies back on track. Many investors, as we know, 720 00:35:15,760 --> 00:35:17,560 Speaker 20: would have said this was long in coming. 721 00:35:17,920 --> 00:35:20,920 Speaker 2: Or the thirty two thousand tech employees let go already 722 00:35:20,960 --> 00:35:24,520 Speaker 2: this year, including ten percent of those working at a Snap. 723 00:35:24,360 --> 00:35:26,840 Speaker 9: Snap saying, these cuts are being made to quote. 724 00:35:26,680 --> 00:35:31,320 Speaker 20: Best position our business to execute on our highest priorities. 725 00:35:31,400 --> 00:35:34,520 Speaker 20: It's been facing that deceleration and ad revenue, as have 726 00:35:34,640 --> 00:35:36,160 Speaker 20: many of its tech peers. 727 00:35:36,640 --> 00:35:39,520 Speaker 2: Or the twelve thousand people in management at ups who 728 00:35:39,560 --> 00:35:41,000 Speaker 2: are about to be shown the. 729 00:35:40,960 --> 00:35:43,279 Speaker 21: Door, and what they're really doing is looking at the 730 00:35:43,320 --> 00:35:47,080 Speaker 21: structure of their networks, you know, whether that is their 731 00:35:47,200 --> 00:35:51,160 Speaker 21: labor network, and then their management ranks. They're looking at 732 00:35:51,200 --> 00:35:53,800 Speaker 21: their brokerage business. They've decided to put that under a 733 00:35:53,800 --> 00:35:57,480 Speaker 21: strategic review. What it is showing us is that they're 734 00:35:57,520 --> 00:35:59,360 Speaker 21: taking a hard look at their costs. And you know 735 00:35:59,400 --> 00:36:02,399 Speaker 21: we would they have to say, Ups and some other 736 00:36:02,520 --> 00:36:05,120 Speaker 21: large transportation companies have gotten fat over the years. 737 00:36:05,320 --> 00:36:09,160 Speaker 2: Not even those in the relatively new departments devoted to diversity, equity, 738 00:36:09,160 --> 00:36:11,400 Speaker 2: and inclusion are immune. As we heard this week that 739 00:36:11,520 --> 00:36:15,560 Speaker 2: Zoom is shuttering the entire operation and outsourcing it. As 740 00:36:15,600 --> 00:36:19,239 Speaker 2: Paul Wolfowitz suggests, there's nothing new in layoffs. They came 741 00:36:19,280 --> 00:36:22,080 Speaker 2: to my hometown of Flint, Michigan in the nineteen eighties, 742 00:36:22,400 --> 00:36:24,680 Speaker 2: and before they were done, the auto plants where my 743 00:36:24,800 --> 00:36:27,759 Speaker 2: father and grandfather had worked were gone. 744 00:36:28,120 --> 00:36:32,480 Speaker 22: Flint, Michigan, USA built cars for General Motors, the world's 745 00:36:32,520 --> 00:36:37,080 Speaker 22: largest corporation, until Roger Smith, the chairman of General Motors, 746 00:36:37,440 --> 00:36:40,440 Speaker 22: shut down the assembly lines. 747 00:36:41,320 --> 00:36:43,719 Speaker 9: We do not have any plan to cut our workforce. 748 00:36:44,080 --> 00:36:45,960 Speaker 2: Closed eleven automobile plants. 749 00:36:46,120 --> 00:36:48,120 Speaker 5: This is not a plant closing as a loss of 750 00:36:48,160 --> 00:36:49,680 Speaker 5: one product. 751 00:36:49,320 --> 00:36:51,320 Speaker 22: And laid off thirty thousand workers. 752 00:36:51,600 --> 00:36:53,920 Speaker 9: He has as much concern about these people. 753 00:36:53,680 --> 00:36:56,640 Speaker 2: As you do. Anyone who knows business understands that sometimes 754 00:36:56,719 --> 00:37:00,000 Speaker 2: what they call creative destruction is necessary for broader produit 755 00:37:00,000 --> 00:37:03,800 Speaker 2: progress in the economy, in business, and even in the workforce. 756 00:37:04,120 --> 00:37:06,239 Speaker 23: You have some jobs that are lost and other jobs 757 00:37:06,280 --> 00:37:08,760 Speaker 23: that are gained. We had four hundred and fifty thousand 758 00:37:08,800 --> 00:37:11,520 Speaker 23: telephone operators in this country in the nineteen fifties. You 759 00:37:11,560 --> 00:37:14,160 Speaker 23: tell me the last time you talked to a telephone operator, 760 00:37:14,360 --> 00:37:16,480 Speaker 23: we had close to two million people. I assume most 761 00:37:16,480 --> 00:37:18,440 Speaker 23: of them women classified as typists. 762 00:37:18,480 --> 00:37:19,160 Speaker 2: That's not even a. 763 00:37:19,160 --> 00:37:23,040 Speaker 23: Job category anymore in the BLS. And alternately, we've developed 764 00:37:23,280 --> 00:37:26,600 Speaker 23: millions of jobs in technology industries and finance and other 765 00:37:26,920 --> 00:37:29,600 Speaker 23: sectors that have actually been helped by the development of technology. 766 00:37:29,800 --> 00:37:33,280 Speaker 2: And despite all the layoffs, the US unemployment level remains 767 00:37:33,280 --> 00:37:37,280 Speaker 2: in an historically low three point seven percent. But however 768 00:37:37,360 --> 00:37:41,960 Speaker 2: necessary and even beneficial these so called restructurings may be, 769 00:37:42,200 --> 00:37:44,480 Speaker 2: we should never lose sight of what they mean for 770 00:37:44,560 --> 00:37:46,920 Speaker 2: those whose lives are being upended. 771 00:37:47,120 --> 00:37:50,080 Speaker 12: And came here to let you go, pardon, I came 772 00:37:50,080 --> 00:37:51,240 Speaker 12: here to fire you, Jerry. 773 00:37:53,160 --> 00:37:55,080 Speaker 2: That does it. For this episode of Wall Street Week, 774 00:37:55,200 --> 00:38:02,720 Speaker 2: I'm David Weston. This is Blueberg. See you next week.