Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Speaker 1: Week inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus global business, finance and
Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: We've been batting around a lot today. The rally in
Speaker 2: stocks definitely taking a breather today, Tim, market, though I
Speaker 2: thankstill heading toward.
Speaker 3: Its best week in twenty twenty four.
Speaker 2: A lot of it has to do with speculation that
Speaker 2: the Fed ultimately could be moving to cut rates as
Speaker 2: early as June. So that's giving certainly a lift to
Speaker 2: the trade.
Speaker 4: All right, Drich, Yeah, Ryandytrike expected the US economy to
Speaker 4: avoid a recession last year. He also bet that inflation
Speaker 4: would cool sooner than the market was expecting. He added
Speaker 4: exposure to stocks during the banking turmoil last March and
Speaker 4: as the S and P five hundred sink in our
Speaker 4: October In hindsight, pretty good calls, and it's why Bloomberg
Speaker 4: included Ryan in a story about the stock optimists who
Speaker 4: nailed twenty twenty three, and that was back in December.
Speaker 2: You get to wear that mantle for a little while longer. Ryan,
Speaker 2: let's get to the interview with us. Is Ryan Dietrocky's
Speaker 2: chief market strategist at the Carson Group. He's back with
Speaker 2: us from Cincinnati. Good to have you back with us.
Speaker 2: We have had quite a run. This could be the
Speaker 2: best week that we've seen all year. Does it feel like,
Speaker 2: technically or even fundamentally in your view that we're getting
Speaker 2: a little frothy, that there's time that we need a
Speaker 2: little bit of a maybe correction or at least a
Speaker 2: little bit of a pullback.
Speaker 5: Yeah, Carol, Tim, thanks for having me back. And as
Speaker 5: someone whose mom passed away last year due to cancer,
Speaker 5: obviously thinking about Princess Kate and the whole Row family
Speaker 5: and all of our friends over in England and London
Speaker 5: there with the UK, I guess with everything that just
Speaker 5: came out in the last hour or so.
Speaker 3: Thank you for that.
Speaker 5: But get yeah, yes, be getting to the question. There
Speaker 5: no easy way to transform from what we just talked about,
Speaker 5: but let's just do it. Listen. Yes, we are looking
Speaker 5: at maybe a twenty seven percent round in twenty one
Speaker 5: weeks since that late October low. That's one of the
Speaker 5: greatest twenty one week rallies ever. Today could be fingers
Speaker 5: crossed the twenty first all time high already this year
Speaker 5: for the S and P five hundred. If you extrapa
Speaker 5: late that out, guys, that's like over ninety What does
Speaker 5: that mean? The previous record was seventy seven all time
Speaker 5: highs in ninety five, I meaning this could be one
Speaker 5: of the in theory, one of the best years we've
Speaker 5: ever seen. Yes, we think maybe we're due for a
Speaker 5: little pause. We've been overweight equities of come on with
Speaker 5: you for a while saying we're still bolish. We don't
Speaker 5: see a recession. We just have to be I guess
Speaker 5: be aware that what one final comment, what happened yesterday?
Speaker 5: One hundred and eighteen stocks and the sm P five
Speaker 5: hundred made a fifty two week high, the highest number
Speaker 5: we've seen in three years. Okay, that can be sometimes
Speaker 5: a near term kind of I don't say blowof tops
Speaker 5: the right word, but at least need for consolidation. But
Speaker 5: rarely with that many stocks making a fifty two week high,
Speaker 5: does that mean the ultimate peak? This happened, you know,
Speaker 5: like March and April of twenty one. Remember what happened
Speaker 5: the rest of twenty one pretty good year last I checked.
Speaker 5: So we're still bullish, but hey, maybe we're due for
Speaker 5: a little break.
Speaker 4: When you say a little break, a little bit of
Speaker 4: a pullback, or that we're due for. What are you
Speaker 4: talking about, Ryan, what would be within your model?
Speaker 6: Yeah?
Speaker 5: I mean, you know, well, between five to seven percent
Speaker 5: will be perfectly perfectly normal, nothing abnormal. I mean for
Speaker 5: the SMP's like we talked about up ten percent for
Speaker 5: the year, up you know, twenty seven percent the last
Speaker 5: twenty one weeks. And again, what's happened? It's so impressive.
Speaker 5: And you guys have talked a lot about this. If
Speaker 5: you told me Apple will be doing what it's been doing,
Speaker 5: Tesla's doing what it's doing. Oh, and we kick back
Speaker 5: the idea of when the rate cuts will be and
Speaker 5: how many there will be. But I just said, oh,
Speaker 5: you know what, market by being a little trouble, that's
Speaker 5: not what's happened.
Speaker 1: Right.
Speaker 5: What have we seen? Rotation? Rotation, rotation. You've got small
Speaker 5: caps and midcaps doing really well this week after the FED.
Speaker 5: But I'm more impressed, or we're more impressed with the
Speaker 5: industrial leadership, the cyclical leadership, your financials, your materials. The
Speaker 5: fact that those groups are doing well to us message
Speaker 5: of the market cyclical leadership says, hey, this is strong,
Speaker 5: and maybe we can just kind of have the baton
Speaker 5: passed around. And we're still those are groups we've liked,
Speaker 5: we still like them.
Speaker 2: Interesting, So, because I was just looking at some of
Speaker 2: the notes when we wrote the story. Bloomberg News put
Speaker 2: the story out back in December, you said small caps,
Speaker 2: in midcaps, and financials, those are three of your favorites.
Speaker 2: They continue to be three of your favorites. Recession that's
Speaker 2: not even in your playbook at all for twenty twenty four.
Speaker 5: Well it's not. It actually wasn't in our playbook last year.
Speaker 5: That wasn't pretty popular what we said that last year.
Speaker 5: But no, still we still don't see a recession. I mean,
Speaker 5: earnings this year expected to be up ten to eleven percent,
Speaker 5: and I know those are estimates that can potentially change,
Speaker 5: but the bottom line, the consumer's still strong. Look at
Speaker 5: those initial claims still around two hundred thousand. We know
Speaker 5: the big layoffs some of the big tech companies have had,
Speaker 5: but we're just not seeing that go into the consumer.
Speaker 5: I mean, consumer is still strong, still healthy, and final comment.
Speaker 5: You know, wages are like four to five percent this year,
Speaker 5: inflation's around three and a half percent. I mean, wager,
Speaker 5: you are still growing faster than inflation. That's normally a
Speaker 5: positive sign. And we still think the consumer is going
Speaker 5: to lead this economy the rest of this year, maybe
Speaker 5: even further.
Speaker 4: Hey, Ryan, we spoke to somebody yesterday. He's not necessarily
Speaker 4: on the same page. Look, this is what makes a market.
Speaker 4: But curious what you know, you'd say to her. Cheryl
Speaker 4: Smith over at Trillia Masset Management, she's an economist, she's
Speaker 4: a portfolio manager there. She thinks we're four to six
Speaker 4: months away from a recession. She's starting to see cracks
Speaker 4: or softness, she said, in many of the state unemployment figures,
Speaker 4: she's seeing credit card delinquencies going up. What say you
Speaker 4: of that data.
Speaker 5: Yeah, we are starting to see some of that. Those delinquencies.
Speaker 5: I can't disagree. I mean, it is what it is.
Speaker 5: But again, when you look at those is it more normalized.
Speaker 5: We had historically low delinquencies this time two years ago,
Speaker 5: right with all the government giving people money and different things.
Speaker 5: Now we think it's more normalizing right now. And in
Speaker 5: the other side to that. I mean, listen, the interest
Speaker 5: rates are higher, there's a lot of debt out there.
Speaker 5: People are paying a lot more interest on the debt
Speaker 5: that they have. People seem to forget though the other
Speaker 5: side of that, I mean six trillion dollars in money markets.
Speaker 5: I'm not so sure that's just going to lead money
Speaker 5: markets go to stocks will be very clear, but people
Speaker 5: are comfortable getting their four to five percent. If you
Speaker 5: look what's happened the last three years, the money people
Speaker 5: are paying on interest for debt over here is actually
Speaker 5: offset by what they're getting on interest in their money markets.
Speaker 5: People don't always talk about that, and again, I know
Speaker 5: a lot of people are struggling, but just the truth,
Speaker 5: net welts at all time high. Net welt's actually growing faster.
Speaker 5: You know, assets are growing faster than the liabilities. Look
Speaker 5: at the data from the FED. So it's not perfect,
Speaker 5: but again, I don't see a recession in six months.
Speaker 2: Put it that way, Hey, Ryan, what's stronger the technical
Speaker 2: story for stocks to continue to move higher or the
Speaker 2: fundamental story for stocks to head higher?
Speaker 6: Yeah?
Speaker 5: I think the technical I mean a great question. I
Speaker 5: mean we've got a little bit of both, but I
Speaker 5: think it is a technical I just talked about all
Speaker 5: those new highs that we just saw. You know, we
Speaker 5: had the fiftieth trading day of the year last week,
Speaker 5: we were up more than five percent. As of the
Speaker 5: fiftieth trading day, curl, I took a look, what happens.
Speaker 5: It's a good start to a year. Let's be clear,
Speaker 5: twenty five times we had the fiftieth day were up
Speaker 5: at least five percent. The rest of the year was higher.
Speaker 5: Ready for this twenty four out of twenty five times.
Speaker 5: I've grown with you guys a lot using stats like that,
Speaker 5: and I know they're just one stat don't invest blindly
Speaker 5: in anything in a one stat, but we've seen a
Speaker 5: lot of those. Factoring in the fact that what the
Speaker 5: Fed has said there's probably three cuts coming. The FED
Speaker 5: just up created their view on GDP. I mean, I
Speaker 5: hate to say it's like this perfect nirvana that we're
Speaker 5: living in right now, but it it really is. Things
Speaker 5: are a lot better. And maybe what worries me though, guys,
Speaker 5: and this logical question what worries me the most. I'm
Speaker 5: looking around a lot of people that were bearish last
Speaker 5: year now bollish. Well, that's optimistic right now, that kind
Speaker 5: of worries me a little bit, right, what Patten say
Speaker 5: everybody's thinking of like somebody isn't thinking. I mean, maybe
Speaker 5: that's where that little well does their break could be
Speaker 5: needed because as a lot of Johnny Com lately bulls
Speaker 5: that they were yelling at me a year ago.
Speaker 3: Bryan election year, that's one thing.
Speaker 2: And then okay, so now you said too that we're
Speaker 2: kind of expecting the Fed to make three rate cuts
Speaker 2: if they don't do that, and then let's throw on
Speaker 2: the election year on top of it.
Speaker 3: Those are two big things.
Speaker 2: Does that in any way kind of change or could
Speaker 2: change your outlook your optimistic outlook here?
Speaker 5: I mean it could change it a little bit. But honestly,
Speaker 5: you know what, we're looking for five or six cuts
Speaker 5: this time two months ago, and now we're looking at
Speaker 5: three cuts. Probably why because the economy has been stronger
Speaker 5: in twenty twenty two. The Fed was more hawkish, if
Speaker 5: you will, because now they're a little bit more hawkish
Speaker 5: than where they were two months ago because the economy
Speaker 5: is strong. So we like that real quickly. On the election,
Speaker 5: A lot a lot of people have talked about this,
Speaker 5: but in an election year when you have a president
Speaker 5: up for re election like we do the last ten times,
Speaker 5: going back to the fifties with Eisenhower, the SMP five
Speaker 5: hundred was higher every single time, ten out of ten
Speaker 5: twelve percent on average. It's almost where we are now.
Speaker 5: But just because it's an election year, don't get overly
Speaker 5: concerned or worried. History says election years do just fine,
Speaker 5: especially with an economy strong like this one.
Speaker 4: Hey, Ryan, what changes your mind? What turns you bearish?
Speaker 4: What data would you need to see over the next
Speaker 4: few months in order to change your Viewah?
Speaker 5: Yeah, great question there. So, as someone who looks at
Speaker 5: the market from a technical point of view, if we
Speaker 5: started to see leadership from areas like utilities, like staples,
Speaker 5: you know, a real estate, that would worry me that
Speaker 5: people forget this in late twenty twenty one, it is
Speaker 5: a great bowl market. Where was the leadership in the
Speaker 5: fourth quarter those more defensive areas And we all know
Speaker 5: what happened obviously in twenty twenty two, But fast forward
Speaker 5: to right now. We're seeing real to strength low thing
Speaker 5: utilities and staples, So I'm not seeing that yet. So
Speaker 5: that's the first kind of crack to me. If the
Speaker 5: defensive things start to lead we're not seeing it. We're
Speaker 5: seeing cyclicals lead. So that's still a reason to be bullish.
Speaker 2: Any new names for the upside or downside that it
Speaker 2: popped up on your radar, just got about forty five
Speaker 2: seconds left.
Speaker 5: Well, I know individual names. Well, we like midcaps a lot.
Speaker 5: I mean, midcaps are that area. Everyboney talks about small caps,
Speaker 5: large caps. I mean midcaps are about eight nine percent
Speaker 5: for the year. Nobody's talking about it, right, I mean,
Speaker 5: I think that's an area that quietly could do very
Speaker 5: very well this year. As everyone argues about, you know,
Speaker 5: the Red Sox or the Yankees or small caps or
Speaker 5: large caps. We like midcaps a lot.
Speaker 2: Carol, all right, kind of leave it on that note.
Speaker 2: I'm looking at the S and P five hundred MidCap
Speaker 2: four hundred index. It's up about seven point six percent
Speaker 2: so far here in twenty twenty four. Hey, Ryan, thank
Speaker 2: you so much, Really appreciate it. Ryan Dietrich joining US,
Speaker 2: Chief market strategist at the Carson Group, joining us once
Speaker 2: again from Cincinnati.
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Speaker 4: It's hard to believe it's been a little more than
Speaker 4: a year since a key lender in the world of
Speaker 4: technology and startups came undone, collapsing and requiring the US
Speaker 4: federal government to step in. That failure the second largest
Speaker 4: in US history, in the largest since the Financial Crisis
Speaker 4: of two thousand and eight. It wasn't alone in terms
Speaker 4: of troubles in the regional banking sector. Signature Bank, First
Speaker 4: Republic and the group continues to be on everyone's radar.
Speaker 2: It does, indeed, and with one perspective and why we
Speaker 2: have heard a lot of senior execs in the banking
Speaker 2: sector talk about the value of being boring. Boring that
Speaker 2: is including our next guest with us now is none
Speaker 2: other than the chairman and CEO of PNC Financial Services,
Speaker 2: home to PNC Bank, Bill Demchek. He's joining us now
Speaker 2: from Pittsburgh.
Speaker 7: Bill.
Speaker 2: Great to have you here with us. And I got
Speaker 2: to ask, is that a Bloomberg behind you?
Speaker 4: Of course it's a Bloomberg, right, So nobody sent nobody
Speaker 4: send Bill, and I.
Speaker 6: Be right now. I am probably one of your earliest
Speaker 6: Bloomberg interesting way back to the early nineties on the
Speaker 6: trading flour.
Speaker 2: All right, there are some stories there not only about that,
Speaker 2: but also about what you have seen.
Speaker 3: Well, let's start there.
Speaker 2: I mean, I really appreciate someone who has been within
Speaker 2: the financial industry and then the banking industry for a while.
Speaker 2: You've seen a fair amount of cycles, You've seen crises.
Speaker 2: What's the best word to describe today's banking environment and
Speaker 2: kind of business and economic environment and they don't have
Speaker 2: to be the same word.
Speaker 6: Yeah, Look, I think banking is a little bit unique
Speaker 6: at the moment because we're in this uncertain period. You know,
Speaker 6: it's a function of pending regulation, you know, the impact
Speaker 6: of interest rates and when the fedscin ease or nineties,
Speaker 6: so it's a little bit different. I think the economy
Speaker 6: is kind of what you read about. It feels pretty healthy.
Speaker 6: It's slowing at the margin from a rapid labor's good,
Speaker 6: you know, And least inside of P and C. We're
Speaker 6: largely on the same page with Sir Paul on his
Speaker 6: recent comments.
Speaker 4: What can you tell us about your customers right now?
Speaker 4: And I asked, because we had a really interesting conversation
Speaker 4: with the President's CEO of Citizens Bank of Edmund. I
Speaker 4: mean this is a tiny bank in Oklahoma, one physical
Speaker 4: branch and they have an online business with a thousand customers,
Speaker 4: So I mean we're talking tiny. But Jill Castilla told
Speaker 4: us yesterday that she's never seen a better environment for
Speaker 4: her customers. Things are really really good right now.
Speaker 6: It's Jill's actually a good friend. It's she's not wrong,
Speaker 6: you know it. On the corporate side, there's areas of weakness,
Speaker 6: but there's a lot of areas of strength, particularly as
Speaker 6: we kind of lean into manufacturing and on shoring. Again.
Speaker 6: The consumer, yeah, varies by income level. We've obviously seen
Speaker 6: basic wages increase a lot, particularly at the lower level,
Speaker 6: but at the same time, we've seen the prices of
Speaker 6: their staple goods increase more compounded through time than and
Speaker 6: their wages have, even though in many instances wages of double.
Speaker 6: So you know, it varies well.
Speaker 2: And you know, we kicked off here, you know, Bill
Speaker 2: getting into you that one year essentially a little bit
Speaker 2: more than one year since Silicon Valley Bank and the
Speaker 2: collapse of it.
Speaker 3: Do you feel like we're out of that environment?
Speaker 2: And I think one thing we have learned is right
Speaker 2: that not every bank, not every regional, is the same
Speaker 2: and in terms of their exposure.
Speaker 3: But we're still kind of a little.
Speaker 2: Concerned about commercial real estate, not sure that we've gotten
Speaker 2: through that. So when it comes to concerns within some
Speaker 2: of the banking sector, do you think that we could
Speaker 2: see more troubles still depending on their exposures.
Speaker 6: At the margin, probably in smaller banks, most of which
Speaker 6: you will never have heard of. I think, first of all,
Speaker 6: as you know, I don't particularly like the term regional.
Speaker 6: It's not very descriptive of anything anymore, particularly in a
Speaker 6: digital age. But I'm not going to.
Speaker 2: Call you a super regional, which people call you sometimes.
Speaker 6: No, I don't know what we're national, but I know
Speaker 6: I know you are in that campaign in the second
Speaker 6: But you know, practically and you see the same numbers
Speaker 6: I do. Is banks get smaller, they tend to have
Speaker 6: a higher concentration of real estate. Their concentration of real
Speaker 6: estate tends to be more fixed rate, medium term in
Speaker 6: length and B and C properties, you know, so permanent
Speaker 6: financing on older B and C properties, which is kind
Speaker 6: of the area that's going to get hit the most
Speaker 6: in a higher rate environment with you know, increased office vacancies.
Speaker 6: But it's not a systemic issue, certainly for the for
Speaker 6: the banking industry, not for any of the names you
Speaker 6: will otherwise know, and we'll make our way through it.
Speaker 4: Well, let's talk more broadly, just about about real estate
Speaker 4: and talk to us a little bit about your own
Speaker 4: exposure to real estate and commercial real estate. How can
Speaker 4: you characterize that for us?
Speaker 6: You know, look, it's a small percentage of our total loans,
Speaker 6: that not a big percentage of our capital. We have,
Speaker 6: you know, plus or minus eight and a half billion,
Speaker 6: I guess in total what you would define his office.
Speaker 6: And that is where all the spotlight is starting to
Speaker 6: shine on multi family. But we're not seeing stress and
Speaker 6: multifamily at the moment, notwithstanding you know, news that you
Speaker 6: might see out of New York and affordable in other places.
Speaker 6: Generic multifamilies do and just fine. But inside of office,
Speaker 6: you know, say we have that eight and a half billion,
Speaker 6: there's there's about four and a half billion to five
Speaker 6: billion that is multi tenant, and that's where the problem is,
Speaker 6: and we expect problems there and we're reserved quite a
Speaker 6: high level against it as far as we've cycled through
Speaker 6: you know, these projects that go not performing. We've actually
Speaker 6: been conservative and what we've been reserving, so we feel
Speaker 6: okay about it. We're heavily reserved today. It's gonna be
Speaker 6: you know, most of our stuff comes due over the
Speaker 6: next year, so you know it's kind of project based.
Speaker 6: They come online, so we're gonna we're going to know
Speaker 6: the answer to this pretty quickly.
Speaker 3: I suspect interesting.
Speaker 2: Hey, listen, we also said that boring is something that
Speaker 2: you guys are tapping into. We've got a great chart
Speaker 2: that we can share with those who are watching right
Speaker 2: now that our producer Elizabeth is going to share out
Speaker 2: with everybody. But it talks about bank management, not just
Speaker 2: your own, but others using boring on calls this year,
Speaker 2: quarterly update calls and earnings calls.
Speaker 3: It is up a lot. Boring not a bad thing.
Speaker 2: And you guys have an advertising campaign that you are
Speaker 2: stressing that we do.
Speaker 6: I mean, I'll make a couple of points. I think
Speaker 6: if you look back and hit history, I've talked about
Speaker 6: our bank and banking in general is kind of three
Speaker 6: yards in a cloud of dust, and you grow, you know,
Speaker 6: with GDP and if and if you're good at it,
Speaker 6: you can outpace that but we are by our very
Speaker 6: nature as in industry, when you see outliers so that
Speaker 6: there tends to be something going on underneath that. And
Speaker 6: and and when we think about you know, we use
Speaker 6: the word boring. I don't necessarily like to think of
Speaker 6: myself as important person, but banking auto be I get it,
Speaker 6: but boring. You know, banking shouldn't be drama for our clients.
Speaker 6: It ought to be predictable, consistent, stuff works. They know
Speaker 6: their money's safe. They don't have to read about us
Speaker 6: in the headlines. That that's who we are. That's how
Speaker 6: we define ourselves. You know. We we to the core
Speaker 6: of this company, to the very best of our ability.
Speaker 6: We try to do right by all of our constituents
Speaker 6: every day, and when we screwed up, we fix it.
Speaker 2: We're gonna leave on that note, but I hope we
Speaker 2: can get you back here real soon. Bill Demchek, he's
Speaker 2: CEO at PNC Bank, joining us from Pittsburgh. You are
Speaker 2: listening and watching Bloomberg Business Week.
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Speaker 4: Big Was it big week for IPOs? Reddit raised nearly
Speaker 4: seven hundred and fifty million dollars pricing shares at the
Speaker 4: top end of the range. Shares surged in their debut,
Speaker 4: closing higher by more than a forty eight percent yesterday.
Speaker 4: The other big tech IPO of the week is the
Speaker 4: semiconductor based connectivity company Stera Labs A, surging seventy two
Speaker 4: percent in its debut and continuing to climb higher in
Speaker 4: subsequent days, Carol. In fact, about nine point one billion
Speaker 4: dollars has been raised this year via IPOs on US exchanges.
Speaker 4: That's according to data compiled by Bloomber gets an increase
Speaker 4: of around one hundred and sixty percent compared to this point.
Speaker 2: Yeah last year.
Speaker 4: So does that mean we're seeing a thought?
Speaker 3: It's a good question right in the IPO market, Don okay.
Speaker 4: Kelly Rodriquez says his finger on the pulse of what's
Speaker 4: going on with pre IPO companies. He's the CEO of
Speaker 4: Forge Global. It's a company that gives investors access to
Speaker 4: shares of privately held companies and gives employees of those
Speaker 4: companies the opportunity to sell those shares. So if you
Speaker 4: want to buy shares of open Ai or Anderil, for example,
Speaker 4: accredited investors can do just that on Forge. Kelly, good
Speaker 4: to have you on the program. You've got a great
Speaker 4: view into the IPO market. Are we all good?
Speaker 1: Now?
Speaker 4: Is the thaw happening?
Speaker 8: Yeah, it's happening. It's a question of how quickly is
Speaker 8: it happening. As we're seeing IPO start to gain traction,
Speaker 8: buyers are coming back to the private market, which is
Speaker 8: a good indication.
Speaker 4: Where you so, how different is it then last year,
Speaker 4: for example, at this time, like give us some numbers
Speaker 4: about who's coming back and how much they're coming back.
Speaker 8: Well, first, let me let me just remind everybody you know,
Speaker 8: we run the Leading from Private Securities marketplace and we
Speaker 8: track a lot of data, and so we just put
Speaker 8: out our private market update and here's we're seeing. What
Speaker 8: we're seeing. We're seeing a shift. For sure, by interest
Speaker 8: has exceeded sell interests for the first time in over
Speaker 8: two years. The bid ask spread and the private sector
Speaker 8: has reduced to ten point eight percent, and we're seeing
Speaker 8: year to date, March is hinting at a potential recovery
Speaker 8: on the horizon. But we saw this begin really at
Speaker 8: the beginning of last year. But we're pretty optimistic about
Speaker 8: what we're seeing. I think people are going to watch
Speaker 8: these IPOs and see how they fare. There are a
Speaker 8: lot of companies that still want to get out and
Speaker 8: they're watching what happens with redditeast e.
Speaker 3: And is that why you think it's happening?
Speaker 2: I mean, you say, by interest exceeding sell interest, why
Speaker 2: do you think it's happening? Is it, you know, expectations
Speaker 2: of a lower rate environment and an easier environment for
Speaker 2: either new issues, if you will, or just kind of
Speaker 2: the equity universe overall, Like, why is it?
Speaker 6: Well?
Speaker 8: I think what we saw and this is where it
Speaker 8: needs to be understood. We call this period in the
Speaker 8: private market the great reset after the twenty twenty one exuberance.
Speaker 8: Bear in mind, the private markets lack lag the public
Speaker 8: markets considerably, and so there's been disrupted fundraising dynamics in
Speaker 8: play questions about have we hit the bottom and whether
Speaker 8: or not the IPO window is closed. A lot of
Speaker 8: that sentiment has caused the private markets to freeze, and
Speaker 8: so the thawing really started later than what you saw
Speaker 8: in the public markets. And what we look for is
Speaker 8: a sustained amount of data that tells us that it's
Speaker 8: coming back. And so what we're seeing now is a
Speaker 8: convergence of some of that data, example being the seventy
Speaker 8: five most liquid names are in the Forged Private Market
Speaker 8: Index that declined last year twenty percent, while the SMP
Speaker 8: was up over twenty percent. But now given where we
Speaker 8: sit this year, year to date, we're seeing the first
Speaker 8: increases in the index in the private market. That's an
Speaker 8: indication that people are getting more active coming in and
Speaker 8: they're watching the IPO window. So think of it as
Speaker 8: the IPO window opens, and that's an indication that private
Speaker 8: market investing will start again. And companies that were gonna
Speaker 8: go public back in twenty one and didn't and couldn't
Speaker 8: go out in twenty two or twenty three are lining
Speaker 8: up to watch and see what happens here with Redd
Speaker 8: at Nestera.
Speaker 4: Hey, Kelly, how is this playing out on the marketplace
Speaker 4: right now? In that are you seeing a lot of
Speaker 4: employees who have equity tied up in these privately held companies?
Speaker 4: Are you seeing a willingness on their part to part
Speaker 4: with that equity, and what's the price in general, what's
Speaker 4: the premium that you're seeing there.
Speaker 8: Okay, so we have seen two years of unprecedented sell
Speaker 8: side pressure. Holders of these securities, not just employees but
Speaker 8: investors that came in early, have been trying to sell
Speaker 8: or looking to sell for two years. That's why when
Speaker 8: we track the bid ask spread for the last couple
Speaker 8: of years, it's been in the mid twenties to low thirties.
Speaker 8: The fact that it's come down means people are now
Speaker 8: able to start selling. But bear in mind just a
Speaker 8: little bit of valuation metrics that are going on. If
Speaker 8: you look at the market today, seventy five percent of
Speaker 8: the fundraising or transactions that are happening are happening at
Speaker 8: or below the last fundraising levels.
Speaker 4: Yeah, the so called down rounds.
Speaker 8: Yes, I mean seventy five percent of the market is
Speaker 8: trading below the twenty five that's trading above. You've got
Speaker 8: a pretty steam premium actually at the top ten percent
Speaker 8: of the market. So that top ten percent of the
Speaker 8: market's being driven a lot by the AI craze, and
Speaker 8: the AI craze has brought, you know, some energy back
Speaker 8: into the market. There's byside interest across the entire spectrum
Speaker 8: of AI players, scale, AI figure, AI perplexity rock, So
Speaker 8: there is some activity happening there. And yes, there's a
Speaker 8: lot of sellers that are now finding buyers for their
Speaker 8: shares and are willing to sell at whatever the discount
Speaker 8: that's required to get that liquidity. It is improving though, That's.
Speaker 2: What I was going to ask you, though, how much
Speaker 2: is it AI companies AI related? I'm also curious about
Speaker 2: where crypto kind of falls into this interest or has
Speaker 2: that really you know, we saw Bitcoin certainly and a
Speaker 2: lot of other cryptocurrencies on a run. We've seen a
Speaker 2: little bit of a pullback, But I'm just curious the
Speaker 2: types of companies that you're seeing where there's interest.
Speaker 8: So, you know, we trade at any given time and
Speaker 8: about two hundred active names. AI's at the top of
Speaker 8: the list. Obviously, Crypto is one of these cyclical sectors
Speaker 8: that when it's hot, people want to buy it and
Speaker 8: and it sort of tracks accordingly. I'd say overall, if
Speaker 8: a company is performing well, if there's growth and there,
Speaker 8: and they're putting up numbers that are essentially turning the
Speaker 8: market towards more reasonable valuations, they're still going to see
Speaker 8: premiums in the share price that they're getting. I mean,
Speaker 8: yesterday we announced, for example, the launch of forged Pro.
Speaker 8: This is really geared towards the institutional investors that are
Speaker 8: now coming back into the space and are looking for
Speaker 8: a combination of a trade settlement system with all of
Speaker 8: the data and pricing information that would inform their re
Speaker 8: entry back in the market. The market is still pretty discounted,
Speaker 8: I'd say there they are very good deals that are
Speaker 8: trading now at that are at fifty percent of their
Speaker 8: last round valuations. But at the top of the market,
Speaker 8: you're definitely seeing valuations go back up and players enter
Speaker 8: the market and watching the IPO space. And if this continues,
Speaker 8: I think we'll see more IPOs in twenty in twenty
Speaker 8: twenty four and even bigger volumes coming.
Speaker 4: Hey, Kelly, I do want to just talk briefly. We
Speaker 4: only have about a minute left, but you're to date
Speaker 4: Forge Global down over thirty percent, close to thirty four percent,
Speaker 4: down more than ninety percent from all time highs back
Speaker 4: in twenty twenty two. What's in your opinion, is the
Speaker 4: market missing about the valuation of your own company that
Speaker 4: is publicly traded.
Speaker 8: I think you know you can. You can never predict
Speaker 8: the sentiments of public investors fully. But we left twenty
Speaker 8: twenty one with spectacular numbers, and the market's been recovering,
Speaker 8: and our revenue has been down on low volumes for
Speaker 8: two years. I think, like everything else, our last couple
Speaker 8: of quarters have demonstrated steady improvement. We've got our earnings
Speaker 8: call on Tuesday, and we think the markets, particularly the
Speaker 8: institutional investors that have looked at Force, love the story
Speaker 8: of what we're doing. They're waiting for the performance of
Speaker 8: the market to come back, and we're working diligently on
Speaker 8: building technology that will enable the market at scale, and
Speaker 8: I think the combination of that investment in the performance
Speaker 8: that we see going forward will put us in a
Speaker 8: position to be judged by the market accordingly in twenty
Speaker 8: twenty four. So we remain optimistic.
Speaker 4: Kelly, appreciate you taking the time in joining us. That's
Speaker 4: Kelly Rodriguez, CEO of Forge Global, joining us from California.
Speaker 4: Thanks so much, Kelly, really appreciate it.
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Speaker 3: All right, let's get to it. As stocks areheaded for
Speaker 3: the best week of the year. Time for a drive
Speaker 3: to the closed guest Data.
Speaker 2: Dioria is back with us CO chief Investment Officer over
Speaker 2: An Investments. They are a tech company provides a software
Speaker 2: platform for the wealth management industry. They've got about one
Speaker 2: hundred and eight thousand advisors on their platform with a
Speaker 2: total they those advisors have a total of about five
Speaker 2: point eight trillion dollars in assets, so a nice little
Speaker 2: vantage point that she certainly has.
Speaker 4: Tim Dana, how are you good to have you with us.
Speaker 3: This afternoon.
Speaker 6: Here?
Speaker 7: Thanks for having me.
Speaker 4: Yeah, okay, So I want to talk a little bit
Speaker 4: about what you're seeing on the platform right now. You're
Speaker 4: in a unique position of having an overview from so
Speaker 4: many different of so many different financial advisors around the country.
Speaker 4: You work with so many different people. Carol mentioned some
Speaker 4: of the stats there one hundred and eight thousand advisors.
Speaker 4: Give us an idea about what you're seeing on the
Speaker 4: platform right now.
Speaker 9: Sure, Well, we look at flows obviously, and you know
Speaker 9: which asset classes are gaining the interest I think not,
Speaker 9: you know, not surprisingly, we've seen a lot of interest
Speaker 9: in short term fixed income in the last you know, year,
Speaker 9: and even recently. You know, you've seen obviously morning market
Speaker 9: assets ballooning, and you know, the platform's kind of seeing
Speaker 9: the same thing. US equities as well have been an
Speaker 9: area of you know, just in terms of the overall allocation.
Speaker 9: If you if you take the average allocation across the
Speaker 9: different programs, US equity, short term fixed income, those are
Speaker 9: areas that have been gainers.
Speaker 4: Okay, So how is that different than where we were,
Speaker 4: let's say, a year ago. I mean, Carol and I've
Speaker 4: talked about this quite a bit. We're up close to
Speaker 4: thirty percent right now in the S and P five hundred,
Speaker 4: not quite there since those October lows of just a
Speaker 4: few months ago. How is the activity different than what
Speaker 4: you saw a year ago when there was so much
Speaker 4: concern out there that the US would be in a
Speaker 4: recession imminently.
Speaker 1: Yeah.
Speaker 9: I think there was definitely a lot of you know,
Speaker 9: there was a lot of around, hey, we need to
Speaker 9: shore up fixed income positions and make sure we're rebalanced
Speaker 9: properly into fixed income, and that I would say is
Speaker 9: probably the big difference. I mean, of course, you know,
Speaker 9: you're to be clear, right, We're a platform with advisory
Speaker 9: assets that are across asset allocated models, So these are
Speaker 9: incremental changes that we're going to see, right, most people
Speaker 9: are you know, fully allocated. But those are the big ones,
Speaker 9: i'd say, are the differences between what we saw a
Speaker 9: year ago and where there was.
Speaker 7: Maybe more interest in some of the different fixed income
Speaker 7: than there is.
Speaker 3: Any sentiment out there.
Speaker 2: Like we were talking earlier data that all of a sudden,
Speaker 2: it seems like the pessimist are also now turning optimists,
Speaker 2: and people are kicking up their targets for the s
Speaker 2: and P five hundred. When everybody gets optimistic, I'm like,
Speaker 2: it doesn't make me feel good, But tell me what
Speaker 2: you're seeing in terms of sentiment indicators and maybe what
Speaker 2: it tells you about the outlook here.
Speaker 9: Yeah, certainly we sit at the junction of a lot
Speaker 9: of different research and you're absolutely right, you know, it's
Speaker 9: hard to be bear in this market, but we're about
Speaker 9: two years after the start of the tightening cycle, and ironically,
Speaker 9: you know now is when you might want to be
Speaker 9: shoring things up. Traditionally for the expectation of potentially not
Speaker 9: getting that soft landing.
Speaker 7: So I would say that there's not.
Speaker 9: A lot of bears, you know, and there is you know,
Speaker 9: obviously discussion around this bull market versus other bull markets,
Speaker 9: small caps versus large But I do think, you know,
Speaker 9: at the end of the day, there are plenty of
Speaker 9: people who recognize that, yes, I should still have ballast
Speaker 9: in the portfolio, right and and nobody's kind of moving
Speaker 9: away from that.
Speaker 7: And yes, you know, we're not going to get probably as.
Speaker 9: Many interest rate decreases all SEQL what we know today
Speaker 9: that as maybe we thought we would, and we're not
Speaker 9: necessarily completely out of the woods. So you know, hard,
Speaker 9: hard to hard to be moving out of markets, and
Speaker 9: certainly we're not recommending that people do.
Speaker 2: Uh.
Speaker 7: But at the same time, keeping that forty in your
Speaker 7: sixty four is still important.
Speaker 2: Hey, data without opening up kind of the safe on
Speaker 2: the track, the amount of information that you can see
Speaker 2: from all of those investment advisors that are that are
Speaker 2: on your platform.
Speaker 3: But you do.
Speaker 2: One of the reasons we like and I've said this
Speaker 2: before and I or Tim we both feel this way
Speaker 2: that you know, one of the reasons we like talking
Speaker 2: to you is because you do have so many advisors
Speaker 2: on the platform and there's a lot of information and
Speaker 2: data flow and I I do you know, I'm hearing
Speaker 2: what you're saying in terms of Europe the broad macro thing.
Speaker 2: But I mean, are there any interesting new trends in
Speaker 2: terms of what investors are doing? Is it moving money
Speaker 2: more into equity? Is it moving market and you know,
Speaker 2: money into alternative out Like what is it that you're
Speaker 2: seeing in particular, and also like with the treasury trade
Speaker 2: and what it tells you about kind of expectations from
Speaker 2: the FED longer term.
Speaker 9: Yeah, it's not it's not at the at the aggregate level,
Speaker 9: it's not a ton of tactical I will tell you. Interestingly,
Speaker 9: we're we're monitoring bitcoin and the new spot ETFs there
Speaker 9: pretty closely. We have you know, obviously gray scale on
Speaker 9: the platform, and is there going to be you know,
Speaker 9: movement from gray scale into some of the bitcoin ETFs
Speaker 9: you've seen in the Spot Bitcoin ETFs kind of just
Speaker 9: explode within literally a month, you know, at an industry level,
Speaker 9: and so that's kind of something we're watching, and we're
Speaker 9: seeing assets starting to flow that way as we would expect.
Speaker 7: I think it's an interesting place.
Speaker 9: If you're, you know, a financial advisor, perhaps your clients
Speaker 9: were doing their crypto trades outside of what you oversaw.
Speaker 9: Now you've got vehicles where you as the advisor, if
Speaker 9: the client wants to do it, it's a speculative trade,
Speaker 9: no question about it.
Speaker 7: But if your client.
Speaker 9: Is doing you know, bitcoin, would you like that to
Speaker 9: be something that you at least oversee that you can
Speaker 9: at least offset from a tax perspective, or you know,
Speaker 9: kind of monitor and keep discipline around the sides of
Speaker 9: the position. So I think that's one, you know, in
Speaker 9: terms of just kind of popping things that that's one
Speaker 9: area that I would point to.
Speaker 4: How would you characterize the interest overall on the platform
Speaker 4: in it as an asset that people actually want in
Speaker 4: their portfolios?
Speaker 9: You know, I will say to you that the managers
Speaker 9: are kind of they're they're stepping carefully on this. What's
Speaker 9: interesting about it, I think is that certainly you've seen
Speaker 9: the fund big asset managers come out with these funds.
Speaker 9: But I would say that to a certain extent that
Speaker 9: sort of d risks maybe what people were already doing.
Speaker 9: If I wanted access to spot bitcoin, I can get
Speaker 9: it now in a vehicle that's backed by these very
Speaker 9: large asset managers, and so to a certain extent that
Speaker 9: might d risk if I was already going to be
Speaker 9: in it. I think what's interesting to watch what the
Speaker 9: asset managers is. You know, when do some big asset
Speaker 9: managers start putting this into and or if they start
Speaker 9: putting it into big asset allocation models, because that now
Speaker 9: brings in clients who would not on their own otherwise
Speaker 9: have gone, you know, and it kind of legitimizes it
Speaker 9: in a very different sense. And so in a sense
Speaker 9: brings the risk into the model. You know, depending on
Speaker 9: what you think you know as a reasonable risk. There
Speaker 9: is re search out there that you know, the upside
Speaker 9: potential is so high, and people like that Lotto payoff
Speaker 9: that small allocations one to three percent.
Speaker 7: Are you know, aren't an outrageous idea.
Speaker 9: But at the end of the day, does that belong
Speaker 9: in you know, a fully acid allocated model that's there
Speaker 9: for the client's retirement. So I think that's going to
Speaker 9: be the interesting thing to watch. We haven't seen any
Speaker 9: big model management doing that yet.
Speaker 2: Hey, what data is a smart conversation around small caps
Speaker 2: versus large caps versus maybe mid caps. We talked with
Speaker 2: Ryan Dietrich earlier and he's got some interest in the
Speaker 2: in the mid cap space. He was smart on calls
Speaker 2: last year. But I'm just curious, when you start to
Speaker 2: break down the market among the different market cap sizes,
Speaker 2: what's the smart conversations that you are hearing from some
Speaker 2: of your investment advisors.
Speaker 9: Yeah, the thing about that is that it's really hard
Speaker 9: to get away from large cap. You know, whether you're
Speaker 9: passively managed, you're in an index solution, or even if
Speaker 9: you're actively managed, it's very hard for active managers on
Speaker 9: the platform and anywhere right to be taking massive tracking
Speaker 9: error risk to this market and missing out on, you know,
Speaker 9: the drivers of return, which I've been those as you.
Speaker 7: Know, ultra large growth stocks.
Speaker 9: So you know, any amount of tilting towards small cap
Speaker 9: I think helps alleviate some of that concentration risk.
Speaker 7: Obviously you've been talking about.
Speaker 9: Apple and you know, making no statement one way or
Speaker 9: the other on it, but just kind of does highlight
Speaker 9: the fact that you know, the concentrated market does bring
Speaker 9: with it a certain amount of risk that we've ignored,
Speaker 9: you know, and it's become you know, megacap has become
Speaker 9: quality synonymous with quality, but it is a concentration risk.
Speaker 9: And so I think there is an effort and an
Speaker 9: interest in you know, where the breadth in the market
Speaker 9: and having you know, an allocation that includes these these
Speaker 9: non megacaps. And I you know, on a personal note,
Speaker 9: small value has outperformed over time. So I think, you know,
Speaker 9: to the extent you could take a little tracking error
Speaker 9: going there is not a bad idea.
Speaker 3: All right, we got to run halothen to have a
Speaker 3: great weekend. Danda Dioria. She's co chief investment officer at Investment.
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