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

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Speaker 2: Slovak Prime Minister is shot, Memestock's return and inflation takes

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Speaker 2: a half step back. This is Bloomberg Wall Street Week.

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Speaker 2: I'm David weston this week. Paul Talban PJT Partners on

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Speaker 2: what's holding.

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Speaker 3: M and A back, The current view on anti trust

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Speaker 3: is clearly having a chilling effect.

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Speaker 2: And Elizabeth Career of JD Power on what difference the

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Speaker 2: new tariffs on Chinese evs will.

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Speaker 4: Make consumers are looking for lower cost vehicles within the

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Speaker 4: segments of their preference.

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Speaker 2: We start with the CPI numbers out on Wednesday, giving

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Speaker 2: investors a sigh of relief when it comes to inflation.

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Speaker 2: To explain the numbers in the larger context of the

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Speaker 2: economy and monetary policy. Welcome back now, Rick Reader. He's

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Speaker 2: Blackrock Chief investment Officer for Global fixed Income and head

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Speaker 2: of the Global Allocation Investment Team. Rick, always a treat

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Speaker 2: to have you on Wall Street Week.

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Speaker 5: Thanks for having me.

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Speaker 2: So let's start with the CPI number. As you saw

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Speaker 2: what the markets have made out of it, they liked

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Speaker 2: it a lot because they thought maybe inflation is coming down.

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Speaker 6: What did you make out of those numbers, so the

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Speaker 6: worst fears were allayed. I mean it was it wasn't

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Speaker 6: that far from expectations. You know, the markets can tend

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Speaker 6: to parse a couple of hundreds of basis point through

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Speaker 6: our basis point to determine like it's better or worse.

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Speaker 6: There were some things that were that were better there

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Speaker 6: that we're encouraging, including you start to see some of

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Speaker 6: the transportation services come down. Rent started to come down

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Speaker 6: of it, So there's some encouraging things. It was pretty

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Speaker 6: much on expectation, but there was a fear because we've

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Speaker 6: had three months in a row of high numbers that

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Speaker 6: maybe we're moving to a more normal, more stable environment.

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Speaker 6: And by the way, it was contiguous to retail sales

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Speaker 6: that were softer. Some of what you've seen play out

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Speaker 6: in these earnings reports. There's definitely some consumer pullback. So

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Speaker 6: the combination of N and PPI not being that bad,

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Speaker 6: some stability, and then gosh, you're seeing some softness show up.

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Speaker 6: That you've got a federal reserve that you know already

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Speaker 6: raise the bar of hiking rates, but now you can

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Speaker 6: you can start to think, can you get a cut

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Speaker 6: or two done this year? And I think that in

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Speaker 6: bold in that thesis.

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Speaker 2: It's always in the media have a tendency to look

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Speaker 2: at a number, how much is up or down? There

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Speaker 2: are a lot of things under that number. Address one

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Speaker 2: thing I've been curious about goods versus services because there's

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Speaker 2: a different trend there and inflation. From the Fed's point

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Speaker 2: of view, do they need both goods and services to

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Speaker 2: come down? Because the one is going down, the other

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Speaker 2: not so fast.

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Speaker 6: So it's pretty remarkable. You know, we're moving to a

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Speaker 6: service oriented economy. More money is being spent on services.

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Speaker 6: But it's actually what's happening because goods prices have come

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Speaker 6: down so much, it's allowing for disposable income to go

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Speaker 6: into services. That's actually booing prices and services ironically. You know,

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Speaker 6: I've said this over time, and I've used a bunch

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Speaker 6: of examples. Like a price of a pair of tennis

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Speaker 6: shoes is what it was twenty years ago. If you

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Speaker 6: go to a tennis match, it's double what it used

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Speaker 6: to be, So meaning services, goods come down service Thinking

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Speaker 6: about an autos price of autos on relative basis, So

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Speaker 6: what's happening for the Fed? Listen, you want to get

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Speaker 6: the average, you want to get inflation down to around

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Speaker 6: the two percent number. Their mandate is price stability is

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Speaker 6: not two. If you're running two and a half, you know,

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Speaker 6: core pcees now two eight. But it's pretty stable. We

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Speaker 6: think it'll be pretty stable throughout the year if you've

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Speaker 6: got a good economy nominal GDP. So if you take

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Speaker 6: two eight of inflation, you get real GDP of two,

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Speaker 6: you've got a nominal GDP of four and.

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Speaker 5: A half to five. Pretty good. I mean, it's a

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Speaker 5: pretty good environment.

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Speaker 2: Some people have been surprised. I think that the economy

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Speaker 2: has not reacted faster to five hundred basis points and

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Speaker 2: interest rate increases. Some of that is because you can

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Speaker 2: turn out the debts some people do. And one of

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Speaker 2: the things that we've seen recently is a difference for

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Speaker 2: households because you know what they own, their mortgage, which

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Speaker 2: is a longer term thing, and the shorter term debt

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Speaker 2: such as credit cards and auto payments.

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Speaker 6: I'm not certain that raising interest rates actually brings down inflation.

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Speaker 6: In fact, I would lay out an argument that I actually,

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Speaker 6: if you cut interest rates, you'd bring down inflation. Why

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Speaker 6: is that exactly to your point, look at what's happening now.

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Speaker 6: Interest expense is growing, has now eclipsed mortgage payments. Lower

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Speaker 6: income who much higher percentage of their of their net

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Speaker 6: worth is in the debt, credit cards, student loans, auto finance, etc.

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Speaker 6: What's happened is you've raised the rate and that has

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Speaker 6: created a real impact. But the other side of it

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Speaker 6: is you actually have an economy because of this massive

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Speaker 6: transfer from the public sector, from the government to the

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Speaker 6: private sector. People are higher income, middle to higher income

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Speaker 6: are now getting a big benefit from these interest rates,

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Speaker 6: and that's flowing into those are the people that spend

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Speaker 6: an aggregate on services. So there's an ironic thing that

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Speaker 6: I've never seen, nobody's ever seen in history, big transfer

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Speaker 6: of money from the government into the private sector. The

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Speaker 6: private sector now is a creditor versus a debtor in

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Speaker 6: terms of the the big pocket of wealth. It's what's

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Speaker 6: happening those lower income. So there's the chart we show around.

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Speaker 6: Look at restaurants, high end restaurants killing it, low end

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Speaker 6: restaurants or low income having a really tough time. You

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Speaker 6: saw it in all the earnings in this last quarter.

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Speaker 6: Really big deal today. And then the other side of

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Speaker 6: it is not as lower income getting hurt. Not only

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Speaker 6: is small business getting hurt, local banks getting hurt in

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Speaker 6: part of why I think they need to bring the

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Speaker 6: rate down.

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Speaker 5: But you look at companies today.

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Speaker 6: Normally when you raise the interest rate, companies pull back.

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Speaker 5: Companies term their dead out.

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Speaker 6: Because we went through not only a transfer of money

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Speaker 6: from the government to the private sector, we kept interest

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Speaker 6: rates down for so long. Seventy percent of the high

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Speaker 6: youd market termed their dead out when the fundsrate was

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Speaker 6: under one. They have no debt company, they have no

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Speaker 6: real maturity wall. So think about what the interest rate

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Speaker 6: does you raise it, it doesn't really matter for companies.

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Speaker 6: In fact, companies are sitting in a lot of cash,

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Speaker 6: so they're actually getting the benefit of higher rates. So

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Speaker 6: point being, I think the Federal Reserve can get that

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Speaker 6: rate down from five and three a's.

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Speaker 5: Even if you got it to four four and a half.

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Speaker 6: Still restrictive relative to a two eight core PCE.

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Speaker 5: And I just am not.

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Speaker 6: It's not clear to me you've raised rates five hundred

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Speaker 6: basis points, does it really impact inflation? And I would

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Speaker 6: argue at a certain level it actually maybe is actually

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Speaker 6: helping keep inflation high in a because we've never seen

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Speaker 6: this in history.

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Speaker 5: Because of those other influences.

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Speaker 2: So you think it's possible if they cut rates, it

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Speaker 2: actually might deter inflation rather than's go around.

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Speaker 6: By the way, I throw one other thing, there's been

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Speaker 6: an aging of the population that we've never seen before

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Speaker 6: and a wealth creation at the higher end. It's actually

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Speaker 6: if you break down the demographic today, there's been an

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Speaker 6: incredible growth of the savings and the spending at old

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Speaker 6: from older people at fifty five and above. It's fascinating

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Speaker 6: what's happening. By the way, if you keep the real

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Speaker 6: rate high, huge benefit to those people. They're turning around spending.

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Speaker 6: So why is inflation high in things like health insurance?

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Speaker 6: Why is inflation high in number of these service sectors,

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Speaker 6: auto insurance, etc. They're sticky, they're unresponsible interest rates, and

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Speaker 6: people are spending. Older people middle to high income are

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Speaker 6: spending and are keeping that service level inflation at high levels.

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Speaker 2: Is it a good thing for fixed income investors right now?

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Speaker 2: What is the timing good right now?

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Speaker 6: So I would say I don't think rates are going

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Speaker 6: to come down. You know we're gonna have this incredible

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Speaker 6: rate drop of anytime soon. I do think the world

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Speaker 6: is in more of an easing cycle. You look at

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Speaker 6: obviously in Europe, UK moving faster, emerging markets, many countries moving,

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Speaker 6: so Argentina just dropped the rate in a radical way.

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Speaker 5: So that is healthy. But there's something in fixing i'm

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Speaker 5: not I think is extremely unique. You can create income.

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Speaker 5: I mean for years, decades we were sitting at rates

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Speaker 5: or a zero.

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Speaker 6: You had to buy dicey emerging markets, you had to

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Speaker 6: buy dicey parts of the high yield market. Today you

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Speaker 6: can create a six six and a half seven percent yield.

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Speaker 6: And so what you're seeing is people like, gosh, if

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Speaker 6: you can get me six and a half without a

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Speaker 6: lot of volatility. I own equities, I get volatility there,

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Speaker 6: I'm okay with it. Give me my fixing, Come get

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Speaker 6: me a lot of yield without the same volatility. That's

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Speaker 6: a pretty unique point time. I've said it's the golden

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Speaker 6: era of fixed inc. I'm not because rates are going

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Speaker 6: to come down, but you can build a lot of

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Speaker 6: yield in the portfolios.

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Speaker 2: So explain something to me I don't understand as a

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Speaker 2: fixed income investor in a marketplace. Normally, if that's true,

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Speaker 2: a lot of money will crowd into fixed income and

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Speaker 2: that should drive their rates down. Actually, right, So you

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Speaker 2: don't get as much out of them. Why isn't the

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Speaker 2: market actually taking a lot of that benefit out of

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Speaker 2: the investment fixed income.

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Speaker 6: So it's a great question. So there's two things happening.

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Speaker 6: One US government has a huge amount of debt that

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Speaker 6: they've got to keep issuing. And I've said that four

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Speaker 6: hundred billion a week of bills, one hundred and billion

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Speaker 6: a week on average of coupon issue once from the cup.

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Speaker 6: So there's a ton of money that's coming in. You've

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Speaker 6: got a federal reserve that's keeping the front end of

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Speaker 6: the curve. I would argue too high today, but high today.

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Speaker 6: So those are are obviously keeping the yields where they are.

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Speaker 6: Companies should be borrowing two hundred to three hundred base

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Speaker 6: points lower yield. You know, given we talk about their

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Speaker 6: credit quality is superb today, they're not. Because service level

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Speaker 6: inflation is high. It keeps the rate high. And so

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Speaker 6: as an investor or anybody today who gets to be

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Speaker 6: a lender, you're getting to buy credit asset's a couple

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Speaker 6: hundred base points cheaper than you really should, even though

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Speaker 6: the spreads are tight.

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Speaker 5: It's just because a risk free rate, because it's given

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Speaker 5: how much where treasuries are it's it's so high today.

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Speaker 2: One last one on the investment front, and that is

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Speaker 2: the first thing you talked about, the demand from the

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Speaker 2: treasury there to borrow a lot of money. We here

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Speaker 2: increasingly for all wide registers, Ray Value, Jamie Dimond. Everyone

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Speaker 2: talks about the fact that we are really borrowing a

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Speaker 2: lot of money, and sooner or later there's going to

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Speaker 2: be a problem. We talked to Paul Ryan, somebody you

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Speaker 2: know well last week who said he thinks it's not

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Speaker 2: at all unlikely that the next president, whoever it is,

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Speaker 2: will face perhaps a real debt crisis in the form

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Speaker 2: of a failed treasury auction. Do you see that on

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Speaker 2: the horizon.

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Speaker 5: So those are all smart people. Can I just say agree?

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Speaker 6: And so yeah, I think that debt's too big, and

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Speaker 6: I think we're not going to address the size of

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Speaker 6: the debt in the country today.

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Speaker 5: And I think over the.

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Speaker 6: Next year or two, I think you'll see auctions thirty

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Speaker 6: or auctions that I'll have a hard time clear in

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Speaker 6: the market. It's just it's too much debt at the

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Speaker 6: same point in time most countries, and you know, you

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Speaker 6: think about China, Japan A.

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Speaker 5: You know they have alternatives.

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Speaker 6: They're funding more domestic priorities versus the United States debt,

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Speaker 6: and so I think we have to be pretty careful

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Speaker 6: about that. There's a lot of debt coming. There'll be

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Speaker 6: a point in time if the Fed is moving towards

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Speaker 6: lowering rates, you feel better about we'll be able to

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Speaker 6: fund it.

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Speaker 5: People are comfortable coming in. I'm not going to lose money.

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Speaker 6: There's going to be a point in time where rates

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Speaker 6: will move up again and people say, you know, I

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Speaker 6: don't want it. Who's going to fund it? And so

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Speaker 6: I think what will happen is more we'll have to

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Speaker 6: go on the Fed's balance sheet again. Think about Japan,

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Speaker 6: what happened to the currency Listen. I think we got

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Speaker 6: to be careful about it, and I think policy makers

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Speaker 6: are going to need to address it over the next

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Speaker 6: couple of years.

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Speaker 2: Okay, Rick Reader is going to be staying with us

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Speaker 2: as we turn to the latest developments in the market,

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Speaker 2: including performance of his active fixed income ETF. That's going

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Speaker 2: to be next down on Wall Street week on Bluebird.

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Speaker 2: This is Wall Street. I'm David Weston. Rick Reader of

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Speaker 2: Blackrock has stayed with us. So Rick, there are some

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Speaker 2: larger forces at play right now in financial markets, and

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Speaker 2: one of them is what I would call at least

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Speaker 2: active ETFs. You have your own Blackrock Flexible Income BINK

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Speaker 2: b A n C. I think we talked about when

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Speaker 2: you first announced it on this program. How's it doing

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Speaker 2: so far?

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Speaker 7: So good?

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Speaker 6: I mean, I think we've beaten the aggregate index by

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Speaker 6: you know, since inception eight hundred base, which so for

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Speaker 6: fixed income not equities.

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Speaker 5: It's pretty good. It's pretty good. We're hanging in l right,

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Speaker 5: you know.

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Speaker 6: I think we're up this year, you know, the market

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Speaker 6: where rates have moved higher and the only industries most

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Speaker 6: of the industries are down.

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Speaker 2: So I have no doubt that people are giving you

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Speaker 2: money because you do a better job than the people do.

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Speaker 2: So a lot of it's just on the merits, But

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Speaker 2: what about larger forces. Why is so much money going

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Speaker 2: to ets? And where's it coming from? Other ways? It

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Speaker 2: just because there's that much more money to be invested,

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Speaker 2: or is it coming out of other places?

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Speaker 5: So a couple of things that are happening.

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Speaker 7: You know.

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Speaker 6: Now models have become so financial advisors that can create

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Speaker 6: these models that can be very precise about where you invest,

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Speaker 6: and gosh, I want to have X amount in yielding

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Speaker 6: fixed income. I want to x amount in this type

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Speaker 6: of technology equities. Maybe I'll take some alternatives, use some

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Speaker 6: private credit, but the ability to be precise around I

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Speaker 6: want active ETFs. Then I just want exposure to an

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Speaker 6: index like I use passive ETFs in my funds all

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Speaker 6: the time. I want to get in the highield really quickly.

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Speaker 6: I can get in through an ETF. I want to

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Speaker 6: buy the SMP through spy. I want to do it

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Speaker 6: really quickly. The marriage of active and passive has become

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Speaker 6: really beneficial to financial advisors. People want to build portfolios,

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Speaker 6: and I just think that's going to grow. I think

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Speaker 6: the whole moniker if it's an active ETF versus passive,

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Speaker 6: I just think it's like, what is your mandate? What

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Speaker 6: are you trying to achieve? And I just think that

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Speaker 6: will continue to grow. And it's so handy for people.

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Speaker 6: It's tax beneficial and they can move quickly when they

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Speaker 6: want to alter their portfolio.

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Speaker 2: Another thing that is a phenomenon right now and is

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Speaker 2: growing the private market's betewually private credit. We've had private

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Speaker 2: equity for some time, but private credit has really been

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Speaker 2: growing dramatically. What do you make of that what's driving

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Speaker 2: that right now?

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Speaker 6: I mean, I think the biggest thing is, you know,

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Speaker 6: if you take of so this before, there's forty seven

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Speaker 6: hundred and fifty banks in the United States, and you know,

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Speaker 6: when you you know, the dynamic recap rate slow, you

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Speaker 6: had a lot of funding, there were a lot of

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Speaker 6: commercial real estate funding, and then local banks regional mind

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Speaker 6: or having a tougher time. There's a dearth of lending

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Speaker 6: to what would be the traditional lending market. So whether

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Speaker 6: it's corporate credit, real estate, you know, everyis oh my god,

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Speaker 6: commercial real estate, and I want to touch it.

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Speaker 5: I don't want to touch office.

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Speaker 6: Office is tricky much of the office real estate markets.

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Speaker 6: But there are things in hospitality, things in logistics, multifamily financing.

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Speaker 6: So what's happened is because of the lending system today

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Speaker 6: being when a lot of banks pulling back have to

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Speaker 6: build capital, it's created this opportunity to create by the way,

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Speaker 6: real yield because of whether risk free rate is, you

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Speaker 6: can create double digit yields with you know, when you think, gosh,

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Speaker 6: what do I want to get an equity? You know,

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Speaker 6: if I can only get mid high teens and equities,

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Speaker 6: if I can get in credit or real estate collateralized.

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Speaker 6: If I can get load a mid double digit return

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Speaker 6: yields mid load of mid teens yields, that's pretty darn attractive.

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Speaker 2: One of the things we hear from people in private

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Speaker 2: credit is it is a better model in that you

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Speaker 2: have long money out and long money in. It's committed

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Speaker 2: to you for a previous time, where banks, of course

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Speaker 2: really substantially on deposits that can be withdrawn. Is that

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Speaker 2: a better model in general or are there downsides that

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Speaker 2: model as well? There's some places where that does not

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Speaker 2: work so well.

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Speaker 6: So listen, I mean a few other federal reserve and

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Speaker 6: you're trying to manage velocity in the system and the

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Speaker 6: lending dynamic and more leaves the banking system, your toolkit

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Speaker 6: becomes more imprecise.

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Speaker 5: In terms how you manage that. So that is that

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Speaker 5: is that is a tricky part of it. Listen.

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Speaker 6: I think that, like everything in life, some balance and

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Speaker 6: some moderation, and I think it's quite frankly, I think

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Speaker 6: it's a very positive evolution that.

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Speaker 5: You have more of a match of asset liabilities.

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Speaker 6: You think about financial christs and other times it's the

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Speaker 6: mismatch of asset liabilities that creates real stress. So today

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Speaker 6: I think that's more in balance. As the banks build

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Speaker 6: capital through this period, you're creating a better buffer and

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Speaker 6: better foundation. But so anyway, I think there's some positives.

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Speaker 6: And by the way, I think, you know, we run

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Speaker 6: a lot of funds that are daily liquidity. You just

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Speaker 6: got to manage your asset liability mix. And I think

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Speaker 6: for people, let's say, Gosh, I want to have stuff

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Speaker 6: that I can move around quickly, and then I'm going

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Speaker 6: to go into alternatives where I'm going to lock my

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Speaker 6: money up. I think it's all about balance. And like

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Speaker 6: my mom used to say, like everything in moderation is

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Speaker 6: is good.

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Speaker 2: US versus the rest of the world Europe, Japan, Asia,

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Speaker 2: things like that. Right now, US seems to be placed.

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Speaker 2: Everyone's going to as fasts they can. Is that likely

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Speaker 2: to continue to think as you see the longer term trends.

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Speaker 6: So I think there are so depends if you're doing

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Speaker 6: debtor equity. Like I think the equity story in Japan

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Speaker 6: is pretty interesting today. Money that used to go to

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Speaker 6: China's going to Japan. Real technology, women in the workforce

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Speaker 6: that are now have real wages. Japan from an equity

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Speaker 6: out of use interesting India in equity is really you

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Speaker 6: got to do sort of small to mid cap companies.

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Speaker 6: Oftentimes India is interesting in the equity side. I think

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Speaker 6: being a lender in Europe UK is interesting because you're

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Speaker 6: not growing as fast. They've got to drop rates faster,

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Speaker 6: inflation's coming down faster. So I like on the death

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Speaker 6: side being more in Europe. On the equity side, being

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Speaker 6: in some of these faster what I always call the rivers,

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Speaker 6: the fast rivers a cash flow, and I think the

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Speaker 6: fastest river at cash flow inequities in the US full

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Speaker 6: stop technology.

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Speaker 5: Evolution is I mean, what we're going through today. Everybody

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Speaker 5: talks about AI.

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Speaker 6: They don't talk about healthcare, biotech, you know, other parts

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Speaker 6: of technology they're developing. Anyway, I still think in equity

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Speaker 6: the fastest river a cash flow is in the is

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Speaker 6: in the US.

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Speaker 2: One last one. It's probably unfair. What's the biggest underpriced

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Speaker 2: opportunity right now for an investor?

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Speaker 5: Most underpriced opportunity? Listen about?

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Speaker 6: You know, I think I think being boring in UH

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Speaker 6: is is okay today, Like I've been doing this thirty

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Speaker 6: thirty something years. I don't say the number, but today buildings,

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Speaker 6: I mean, you know, if you can build six and

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Speaker 6: a half to seven, that is unbelievable that we're not

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Speaker 6: you know, two years from now. If even to say,

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Speaker 6: remember we got to buy European as a dollar investor,

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Speaker 6: you got to buy European investment in grade credit at

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Speaker 6: five and a half to six.

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Speaker 5: Remember we were lending the money at negative yields. Like

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Speaker 5: that's pretty that's pretty good.

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Speaker 6: And then listen, I you know, I think people underestimate

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Speaker 6: how fast technology is changing. Like I think, you know,

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Speaker 6: there's a you know we can talk about, you know,

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Speaker 6: the videos, et cetera. Incredibly impressive. Boy, there's so many

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Speaker 6: secondary and tertiary.

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Speaker 5: Impacts of what's happening there. Like it's an exciting time.

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Speaker 6: I mean, this is really we're watching commerce change sort

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Speaker 6: of like you know, I've said it's like the Internet bubble,

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Speaker 6: except for it's not a bubble because it's cash flow

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Speaker 6: attached to it, and so it's a pretty exciting time.

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Speaker 2: I think, Yeah, real company is making real money like

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Speaker 2: the Internet bubble. Rick, it's always so great to have you.

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Speaker 2: Thank you so much. That's Rick Reader of Black Rock.

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Speaker 2: This is Wall Street Week. I'm David Weston. If inexpensive

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Speaker 2: electric vehicles are the way to get Americans to switch.

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Speaker 2: We're not going to get very many of them for China,

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Speaker 2: as the Biden administration this week announced it would be

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Speaker 2: raising the tariffs on EV's from China to over one

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Speaker 2: hundred percent. To give us a sense of what this

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Speaker 2: could mean for US consumers, we welcome back now, Elizabeth Kreer.

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Speaker 2: She's JD Power Vice President Electric Vehicle Practice. Elizabeth, welcome back.

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Speaker 2: Good to have you here. So, I guess my basic

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Speaker 2: question is these electric vehicles from China are very inexpensive.

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Speaker 2: Is it likely that Americans would buy them anyway? Is

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Speaker 2: there an appetite for cheap Chinese evs?

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Speaker 4: Well, the auto industry is a global industry, as you know,

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Speaker 4: and all competition needs to be taken seriously. At the

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Speaker 4: end of the day, the consumer decides. Consumers want choices,

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Speaker 4: new technology, and value. The USV capacity has now died

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Speaker 4: consumer demand for evs and we're starting to see conquest

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Speaker 4: sales through price deals and incentives.

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Speaker 8: Competition is expected to continue.

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Speaker 4: To increase, with ten more evs hitting the US market

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Speaker 4: this year, particularly in the mid size suv and truck segments.

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Speaker 4: Suv and truck sales make up over eighty percent of

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Speaker 4: the US market. In contrast, small cars make up less

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Speaker 4: than one percent of the US market. The eleven thousand

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Speaker 4: dollars China seagull would be in this small car segment.

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Speaker 4: The Chevrolet Bolt, also a small car under twenty thousand

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Speaker 4: dollars with federal tax incentives. During its peak, sold less

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Speaker 4: than a half a percent of industry monthly retail sales.

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Speaker 4: I'm not an expert in geo political decision making, but

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Speaker 4: consumers are looking for lower cost vehicles within the segments

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Speaker 4: of their preference.

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Speaker 8: There is a void in the marketplace, and this is

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Speaker 8: similar to the.

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Speaker 4: Late nineteen eighties early nineteen nineties when Hyundai Ikia came

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Speaker 4: to the u US market looking to fill the void.

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Speaker 4: The weather low cost evs are first offered by domestic brands,

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Speaker 4: Asian brands, European brands, or Chinese brands will have to

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Speaker 4: wait and see, but there.

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Speaker 8: Is a market for them.

440
00:20:11,600 --> 00:20:14,160
Speaker 2: But as you just said, Elizabeth, within the segment they're

441
00:20:14,240 --> 00:20:17,320
Speaker 2: interested in. It sounds like the segment that you Seagulls in,

442
00:20:17,640 --> 00:20:21,040
Speaker 2: the really small, really inexpensive one that's not potentially that

443
00:20:21,160 --> 00:20:22,600
Speaker 2: much or a threat to US automakers.

444
00:20:24,200 --> 00:20:27,440
Speaker 8: That's correct. That's a very small segment.

445
00:20:28,680 --> 00:20:31,520
Speaker 2: So you've been studying consumers and their reactions to electric vehicles.

446
00:20:31,560 --> 00:20:33,280
Speaker 2: You actually had to report out at the end of March,

447
00:20:33,680 --> 00:20:35,920
Speaker 2: and as I read that it isn't so much the

448
00:20:36,040 --> 00:20:39,520
Speaker 2: price point as the charging stations. People really are invoking

449
00:20:39,600 --> 00:20:40,920
Speaker 2: that as a reason to be hesitant.

450
00:20:43,480 --> 00:20:44,240
Speaker 8: Absolutely.

451
00:20:45,600 --> 00:20:48,920
Speaker 4: You know, we survey over two thousand new vehicle shoppers

452
00:20:49,000 --> 00:20:51,640
Speaker 4: every month to gauge their interest in evs, and when

453
00:20:51,720 --> 00:20:54,760
Speaker 4: we look at the top reasons for rejection those who

454
00:20:54,840 --> 00:20:57,880
Speaker 4: say I am not interested in an EV, we see

455
00:20:57,960 --> 00:21:01,200
Speaker 4: lack of charging station availability as the top reason for rejection,

456
00:21:01,920 --> 00:21:03,400
Speaker 4: but purchase price.

457
00:21:03,280 --> 00:21:07,920
Speaker 8: As the second. So that's where EV education comes into play.

458
00:21:08,080 --> 00:21:11,040
Speaker 4: There is a learning curve to owning an EV, figuring

459
00:21:11,080 --> 00:21:14,080
Speaker 4: out where to charge, how frequent to charge, how much

460
00:21:14,200 --> 00:21:18,119
Speaker 4: to charge, and although for many charging may not truly

461
00:21:18,240 --> 00:21:21,119
Speaker 4: be an issue in terms of availability, but perception is

462
00:21:21,359 --> 00:21:24,520
Speaker 4: reality and charging is simply too much of an unknown

463
00:21:24,560 --> 00:21:27,840
Speaker 4: for them. And same goes for price and understanding the

464
00:21:27,960 --> 00:21:31,200
Speaker 4: total cost of ownership of owning an EV. Often the

465
00:21:31,320 --> 00:21:35,000
Speaker 4: savings with the EV incentives and operating costs and maintenance

466
00:21:35,040 --> 00:21:38,399
Speaker 4: for that matter, often offset that initial price. But again

467
00:21:39,040 --> 00:21:42,600
Speaker 4: this needs to be explained to the average shopper. So infrastructure, price,

468
00:21:42,800 --> 00:21:44,400
Speaker 4: education all very important.

469
00:21:44,720 --> 00:21:46,920
Speaker 2: One last one, Elizabeth, if they need to feel comfortable

470
00:21:46,960 --> 00:21:49,639
Speaker 2: about charging, what's going on right now with Tesla and

471
00:21:49,960 --> 00:21:51,640
Speaker 2: Musk might not give them a lot of comfort because

472
00:21:51,680 --> 00:21:54,000
Speaker 2: it looked like they laid off the entire division and

473
00:21:54,080 --> 00:21:56,040
Speaker 2: then they sort of change their minds. Where are we

474
00:21:56,160 --> 00:21:58,879
Speaker 2: right now with Tesla and the supercharging and have they

475
00:21:58,960 --> 00:21:59,920
Speaker 2: really changed their course?

476
00:22:01,480 --> 00:22:05,800
Speaker 4: This is potentially a big blow to the infrastructure build out.

477
00:22:06,160 --> 00:22:10,040
Speaker 4: The supercharger network is the nation's largest and most reliable

478
00:22:10,119 --> 00:22:14,840
Speaker 4: fast charging network. When NACS was adopted by non Tesla manufacturers,

479
00:22:14,920 --> 00:22:18,240
Speaker 4: that helped address one of the most pressing needs in

480
00:22:18,320 --> 00:22:21,800
Speaker 4: the EV space, which is increased availability of public charging.

481
00:22:22,480 --> 00:22:26,879
Speaker 4: With more evs utilizing those superchargers, that is going to

482
00:22:27,040 --> 00:22:30,800
Speaker 4: add to the congestion increasing weight times, which will be

483
00:22:30,920 --> 00:22:36,560
Speaker 4: exacerbated with increased EV adoption. For now, supercharger has the

484
00:22:36,680 --> 00:22:40,840
Speaker 4: highest reliability ninety five percent compared to only eighty one

485
00:22:40,960 --> 00:22:44,840
Speaker 4: percent for non Tesla networks. With the mass layoff, it

486
00:22:44,960 --> 00:22:48,359
Speaker 4: calls into question Tesla's commitment to growing the network and

487
00:22:48,560 --> 00:22:52,840
Speaker 4: maintaining the reliability, and this move could also impact the

488
00:22:52,920 --> 00:22:57,159
Speaker 4: brand's sales. Public charging availability is a primary driver of

489
00:22:57,280 --> 00:23:01,840
Speaker 4: why consumers purchase Tesla based on our the ownership study. Similarly,

490
00:23:02,320 --> 00:23:06,000
Speaker 4: based on our shopping survey, the number one reason people

491
00:23:06,240 --> 00:23:10,560
Speaker 4: cross shop with Tesla is for the supercharger network. So

492
00:23:10,720 --> 00:23:13,720
Speaker 4: the supercharger network move could impact the brand sales if

493
00:23:13,800 --> 00:23:18,280
Speaker 4: customers no longer see the supercharger network as a brand differentiator.

494
00:23:18,840 --> 00:23:20,760
Speaker 2: Elizabeth is always so helpful to talk to you about

495
00:23:20,800 --> 00:23:23,159
Speaker 2: these things. Thank you so much. That's Elizabeth Career of

496
00:23:23,359 --> 00:23:27,800
Speaker 2: JD Power. Coming up. We're told that M and A

497
00:23:27,960 --> 00:23:30,880
Speaker 2: is on its way back, but when and what's keeping

498
00:23:30,960 --> 00:23:31,800
Speaker 2: it the less?

499
00:23:31,840 --> 00:23:32,240
Speaker 7: Paul J.

500
00:23:32,440 --> 00:23:35,680
Speaker 2: Talvman, he's chairman and CEO of PJT Partners.

501
00:23:36,640 --> 00:23:40,080
Speaker 7: M and A volumes continue to be soft.

502
00:23:41,960 --> 00:23:53,040
Speaker 2: That's next on Wall Street Week on Bloomberg. This is

503
00:23:53,040 --> 00:23:55,600
Speaker 2: Wall Street Week. I'm David weston higher interest rates and

504
00:23:55,720 --> 00:23:58,080
Speaker 2: uncertainty over where they are headed. Put some mergers and

505
00:23:58,119 --> 00:24:00,600
Speaker 2: acquisitions on hold, but they appear to be on their

506
00:24:00,640 --> 00:24:03,440
Speaker 2: way back. Perhaps take us through how far they've come.

507
00:24:03,520 --> 00:24:06,200
Speaker 2: We're welcome now. Paul J. Taubman, he is founder and

508
00:24:06,320 --> 00:24:09,879
Speaker 2: CEO PJT Partners, So thank you so much for being here. Paul,

509
00:24:10,640 --> 00:24:11,959
Speaker 2: give us a sense of where we are. I mean,

510
00:24:12,000 --> 00:24:14,399
Speaker 2: you had some record years of emerging acquisitions and then

511
00:24:14,440 --> 00:24:15,959
Speaker 2: it really fell off a cliff a little bit.

512
00:24:16,240 --> 00:24:17,720
Speaker 5: How far back are we look?

513
00:24:17,760 --> 00:24:19,239
Speaker 3: I think you need to look at this as pre

514
00:24:19,359 --> 00:24:23,320
Speaker 3: COVID and post COVID because the disruptions of the COVID

515
00:24:23,800 --> 00:24:29,040
Speaker 3: period extraordinary, And the reality is almost every market is

516
00:24:29,160 --> 00:24:32,680
Speaker 3: healing and is reaching higher highs other than the M

517
00:24:32,720 --> 00:24:35,480
Speaker 3: and A market. So we're seeing investment grade debt issuance

518
00:24:35,960 --> 00:24:39,760
Speaker 3: record levels, spreads as low as have ever been in

519
00:24:39,840 --> 00:24:42,760
Speaker 3: a similar vein on the equity side, equity issuance now

520
00:24:42,880 --> 00:24:46,040
Speaker 3: is ahead of where it was pre COVID. So all

521
00:24:46,160 --> 00:24:50,040
Speaker 3: of the necessary conditions are in place, and notwithstanding all

522
00:24:50,080 --> 00:24:53,040
Speaker 3: of the desire to transact and to get ahead of

523
00:24:53,160 --> 00:24:58,000
Speaker 3: a changing economy, M and A volumes continue to be.

524
00:24:59,520 --> 00:24:59,800
Speaker 7: Soft.

525
00:25:00,080 --> 00:25:02,639
Speaker 2: So explore the other than part of that. Why is

526
00:25:02,680 --> 00:25:04,960
Speaker 2: it other than Why is M and A lagging behind

527
00:25:05,000 --> 00:25:06,000
Speaker 2: the other markets? Well?

528
00:25:06,000 --> 00:25:07,080
Speaker 7: I think it's a couple of things.

529
00:25:07,200 --> 00:25:13,000
Speaker 3: One is, the current view on anti trust is clearly

530
00:25:13,119 --> 00:25:16,480
Speaker 3: having a chilling effect on some deals. So we see

531
00:25:16,560 --> 00:25:20,119
Speaker 3: many deals being contested. You're seeing the FTC and the

532
00:25:20,200 --> 00:25:24,639
Speaker 3: DOJ being very vigilant in their anti trust enforcement, lots

533
00:25:24,640 --> 00:25:30,119
Speaker 3: of second requests, elongated periods between announcements and closings, and

534
00:25:30,200 --> 00:25:33,080
Speaker 3: it's not just those deals that get reviewed. There's a

535
00:25:33,119 --> 00:25:35,800
Speaker 3: self editing process, and we're seeing a lot of deals

536
00:25:35,840 --> 00:25:38,960
Speaker 3: that are debated vigorously in boardrooms. They never see the

537
00:25:39,040 --> 00:25:42,960
Speaker 3: light of day because companies are uncomfortable putting themselves through

538
00:25:43,040 --> 00:25:44,720
Speaker 3: that extended review process.

539
00:25:45,280 --> 00:25:46,639
Speaker 7: That is one of the big issues.

540
00:25:46,800 --> 00:25:50,920
Speaker 3: And I think the second one is private equity, which

541
00:25:51,040 --> 00:25:54,400
Speaker 3: is such an engine of M and A activity. They've

542
00:25:54,480 --> 00:25:58,920
Speaker 3: not been on the front legs the way they were historically,

543
00:25:58,960 --> 00:26:00,200
Speaker 3: and I think a lot of that has to do

544
00:26:00,680 --> 00:26:01,440
Speaker 3: with interest rates.

545
00:26:01,600 --> 00:26:04,200
Speaker 2: On the first issue about regulation, do boards ever get

546
00:26:04,320 --> 00:26:05,960
Speaker 2: sort of used to it, as it were, because although

547
00:26:05,960 --> 00:26:08,399
Speaker 2: there is a lot of challenges, not too many have

548
00:26:08,480 --> 00:26:11,440
Speaker 2: been successful, as I recall, so at some point they say, okay, yeah,

549
00:26:11,480 --> 00:26:13,200
Speaker 2: they'll challenge, but in fact we'll get it through.

550
00:26:13,920 --> 00:26:17,360
Speaker 3: The batting average of the government has not been very high.

551
00:26:17,480 --> 00:26:19,560
Speaker 3: But what it has done is it's sent a signal

552
00:26:20,280 --> 00:26:23,720
Speaker 3: that for many deals, even if there's no underlying reason

553
00:26:24,119 --> 00:26:27,240
Speaker 3: why the transaction should not be approved, you're going to

554
00:26:27,359 --> 00:26:30,480
Speaker 3: end up with an extended review process and review processes

555
00:26:30,520 --> 00:26:33,920
Speaker 3: that get elongated, they bring risk. And the more risk

556
00:26:34,000 --> 00:26:37,520
Speaker 3: there is, question becomes how does the business perform during

557
00:26:37,560 --> 00:26:40,320
Speaker 3: what could be of twelve to fifteen even eighteen months

558
00:26:40,359 --> 00:26:43,040
Speaker 3: between signing and closing. That's a lot of risk that

559
00:26:43,119 --> 00:26:46,200
Speaker 3: a buyer is underwriting, and I think there are a

560
00:26:46,240 --> 00:26:48,600
Speaker 3: lot of boards that are uncomfortable with that. Now, to

561
00:26:48,680 --> 00:26:51,360
Speaker 3: your point, do we ever get past it? I think

562
00:26:51,400 --> 00:26:54,000
Speaker 3: once we get past this election and we either have

563
00:26:54,040 --> 00:26:57,720
Speaker 3: a change in administration and a change in antitrust policy,

564
00:26:58,560 --> 00:27:01,280
Speaker 3: or there's a sense that the here and now is

565
00:27:01,400 --> 00:27:03,760
Speaker 3: going to stay for another four years, I think either

566
00:27:03,880 --> 00:27:07,600
Speaker 3: one of those is likely to be a significant catalyst

567
00:27:07,760 --> 00:27:10,240
Speaker 3: on those deals that have yet to be brought to

568
00:27:10,320 --> 00:27:10,920
Speaker 3: the marketplace.

569
00:27:11,160 --> 00:27:13,639
Speaker 2: And what about the other item that you mentioned, actually,

570
00:27:13,800 --> 00:27:15,520
Speaker 2: and that is a question of the P and E.

571
00:27:16,240 --> 00:27:18,479
Speaker 2: We're here from a lot of limited partners right now.

572
00:27:18,480 --> 00:27:20,760
Speaker 2: They're a little impatient about getting some of their capital

573
00:27:20,840 --> 00:27:23,479
Speaker 2: back from the general partners. Are there vehicles that get

574
00:27:23,520 --> 00:27:25,399
Speaker 2: around that that you might be involved in.

575
00:27:25,640 --> 00:27:28,720
Speaker 3: Well, if there definitely are vehicles, but let's just kind

576
00:27:28,760 --> 00:27:31,480
Speaker 3: of unpack it. What the problem is if you have

577
00:27:31,800 --> 00:27:34,359
Speaker 3: private equity firms who have bought assets in a low

578
00:27:34,440 --> 00:27:37,120
Speaker 3: interest rate environment and now all of a sudden, rates

579
00:27:37,119 --> 00:27:41,040
Speaker 3: are meaningfully higher. There is a reluctance to monetize or

580
00:27:41,119 --> 00:27:44,080
Speaker 3: to sell those assets in a period where they underwrote

581
00:27:44,080 --> 00:27:46,800
Speaker 3: it at one multiple and now they're looking at selling

582
00:27:46,840 --> 00:27:49,040
Speaker 3: it at a different multiple. And one of the great

583
00:27:49,080 --> 00:27:52,040
Speaker 3: things about private equity firms is they are exquisite in

584
00:27:52,160 --> 00:27:56,399
Speaker 3: controlling the exits. And what we're seeing is with a

585
00:27:56,600 --> 00:27:59,840
Speaker 3: sense that while rates have crested, they have yet to

586
00:28:00,080 --> 00:28:02,880
Speaker 3: come down. It's not going to be until rates start

587
00:28:02,960 --> 00:28:05,520
Speaker 3: to come down. We believe that you're going to see

588
00:28:05,800 --> 00:28:10,440
Speaker 3: a lot of monetizations from the private equity industry, and

589
00:28:10,600 --> 00:28:13,200
Speaker 3: since there haven't been a lot of monetizations, they have

590
00:28:13,320 --> 00:28:17,560
Speaker 3: been reluctant to continue to call capital from their limited partners.

591
00:28:18,080 --> 00:28:20,400
Speaker 3: And in fact, I think we are at an extended

592
00:28:20,400 --> 00:28:24,280
Speaker 3: period of time where the capital calls to investors in

593
00:28:24,359 --> 00:28:28,879
Speaker 3: private equity funds continues to exceed the capital returned, and

594
00:28:29,119 --> 00:28:32,520
Speaker 3: that's putting pressure on the deployment of capital. So private

595
00:28:32,560 --> 00:28:35,920
Speaker 3: equity is less aggressive and deploying capital, and they've been

596
00:28:36,160 --> 00:28:40,160
Speaker 3: less willing to monetize their own assets. And we're trying

597
00:28:40,200 --> 00:28:43,200
Speaker 3: to work with private equity firms to deal with those

598
00:28:43,280 --> 00:28:44,080
Speaker 3: liquidity issues.

599
00:28:44,640 --> 00:28:46,680
Speaker 2: Out of Milkin and Los Angeles last week we heard

600
00:28:46,720 --> 00:28:49,920
Speaker 2: a lot about continuation vehicles. Explain exactly what those are,

601
00:28:50,040 --> 00:28:51,840
Speaker 2: how they work, and how they might release some of

602
00:28:51,840 --> 00:28:52,720
Speaker 2: the pressure. Perhaps.

603
00:28:53,320 --> 00:28:56,640
Speaker 3: So the whole idea of a continuation fund starts with

604
00:28:56,720 --> 00:28:59,120
Speaker 3: the premise that when you find an asset that you

605
00:28:59,360 --> 00:29:03,120
Speaker 3: like and you own it and you continue.

606
00:29:02,680 --> 00:29:04,560
Speaker 7: To deliver superior results.

607
00:29:05,480 --> 00:29:09,240
Speaker 3: This forced shot clock in monetizing it four five six

608
00:29:09,360 --> 00:29:13,160
Speaker 3: years in just simply to give liquidity to investors, many

609
00:29:13,240 --> 00:29:15,920
Speaker 3: of whom would be perfectly content if you just continued

610
00:29:16,320 --> 00:29:19,360
Speaker 3: to own the asset and continue to get excess returns.

611
00:29:19,840 --> 00:29:22,360
Speaker 3: But you do have other limited partners who have other

612
00:29:22,520 --> 00:29:26,160
Speaker 3: needs for the capital want liquidity. So what a continuation

613
00:29:26,320 --> 00:29:30,240
Speaker 3: vehicle does is it gives those limited partners who want

614
00:29:30,440 --> 00:29:34,560
Speaker 3: liquidity the ability to leave or to exit the investment

615
00:29:35,080 --> 00:29:37,960
Speaker 3: and let new funds, new pools of capital come in

616
00:29:38,760 --> 00:29:40,760
Speaker 3: and the private equity firm continues to own and to

617
00:29:40,880 --> 00:29:41,720
Speaker 3: manage the asset.

618
00:29:42,320 --> 00:29:44,240
Speaker 2: So one of the things that has relieved in that

619
00:29:44,440 --> 00:29:47,040
Speaker 2: past some of the pressure on private equity has been

620
00:29:47,160 --> 00:29:50,040
Speaker 2: initial public offerings IPOs, which also have gone through a

621
00:29:50,080 --> 00:29:52,440
Speaker 2: period a little more fallow. Where are we're in a

622
00:29:52,480 --> 00:29:54,400
Speaker 2: the IPL market and could that give relief to some

623
00:29:54,480 --> 00:29:54,960
Speaker 2: of these people.

624
00:29:55,360 --> 00:29:59,080
Speaker 3: The answer is, of course it can, but it's easier

625
00:29:59,160 --> 00:30:02,800
Speaker 3: said than done. So the IPO market is healthier today

626
00:30:02,880 --> 00:30:04,320
Speaker 3: than it was a year ago. I think a year

627
00:30:04,320 --> 00:30:07,080
Speaker 3: ago we were looking at pretty much a shut IPO market.

628
00:30:07,680 --> 00:30:10,960
Speaker 3: We're getting back to levels pre COVID like, but not

629
00:30:11,160 --> 00:30:14,400
Speaker 3: yet there. One of the issues is there's a disconnect

630
00:30:14,480 --> 00:30:16,920
Speaker 3: between how the S and P five hundred companies are

631
00:30:16,960 --> 00:30:20,600
Speaker 3: performing and the broader set of companies. So whether you're

632
00:30:20,600 --> 00:30:24,680
Speaker 3: looking at the midcaps, small cap companies, the Russell, all

633
00:30:24,760 --> 00:30:28,360
Speaker 3: of those indices have meaningfully underperformed the S and P

634
00:30:29,040 --> 00:30:30,640
Speaker 3: and when you look at those companies, in fact, I

635
00:30:30,680 --> 00:30:33,080
Speaker 3: think the Russell is down over the last three years

636
00:30:33,240 --> 00:30:36,959
Speaker 3: in absolute dollars. So there's been a lot of reluctance

637
00:30:37,120 --> 00:30:40,840
Speaker 3: to bring companies to market because those companies that are

638
00:30:40,920 --> 00:30:46,240
Speaker 3: IPO candidates better resemble small and mid cap indosey companies

639
00:30:46,640 --> 00:30:48,440
Speaker 3: than they do the S and P five hundred, and

640
00:30:48,480 --> 00:30:51,560
Speaker 3: there's been this divergence. But there's been a number of

641
00:30:51,640 --> 00:30:55,560
Speaker 3: IPOs that have successfully been launched in the marketplace. They've

642
00:30:55,560 --> 00:30:59,120
Speaker 3: traded well in the aftermarket, and that should begin to

643
00:30:59,320 --> 00:31:03,400
Speaker 3: create some additional liquidity for the private equity firms to

644
00:31:03,520 --> 00:31:06,640
Speaker 3: return capital to LPs to enable them to be more

645
00:31:06,720 --> 00:31:10,520
Speaker 3: front footed in deploying new capital. But what's happened is

646
00:31:10,680 --> 00:31:14,080
Speaker 3: as the IPO market has been shut for an extended

647
00:31:14,080 --> 00:31:17,600
Speaker 3: period of time, there are a lot of these planes

648
00:31:17,640 --> 00:31:20,120
Speaker 3: that are circling up in the air that need to land,

649
00:31:20,800 --> 00:31:25,280
Speaker 3: and the shadows supply of companies looking to IPO is

650
00:31:25,400 --> 00:31:29,040
Speaker 3: probably more than the market can handle, So increasingly they're

651
00:31:29,040 --> 00:31:31,280
Speaker 3: going to need to be other ways to create liquidity

652
00:31:31,840 --> 00:31:33,200
Speaker 3: for these portfolio companies.

653
00:31:33,240 --> 00:31:35,200
Speaker 2: So if you have a willing buyer, winning seller, you

654
00:31:35,240 --> 00:31:37,080
Speaker 2: need to come up with the price. And obviously i've

655
00:31:37,120 --> 00:31:39,320
Speaker 2: interest it's go up. That affects the valuation. I suspect

656
00:31:39,320 --> 00:31:41,240
Speaker 2: that's part of the problem here. But is the problem

657
00:31:41,360 --> 00:31:43,800
Speaker 2: the level of the interest rates or the uncertainty about

658
00:31:43,800 --> 00:31:46,240
Speaker 2: where it's heading. Which is the more chilling effect in

659
00:31:46,360 --> 00:31:46,880
Speaker 2: your business?

660
00:31:47,400 --> 00:31:50,040
Speaker 3: I like to say that you know, you either bought

661
00:31:50,080 --> 00:31:53,000
Speaker 3: things in a higher low interest rate environment and you're

662
00:31:53,040 --> 00:31:55,600
Speaker 3: selling it in a higher low interest rate environment. And

663
00:31:55,720 --> 00:31:59,200
Speaker 3: three of those four quadrants work just fine for deals.

664
00:31:59,720 --> 00:32:01,880
Speaker 3: It's only when you bought things in a low interest

665
00:32:01,920 --> 00:32:04,680
Speaker 3: rate environment and you're now selling them in a high

666
00:32:04,720 --> 00:32:07,360
Speaker 3: interest rate environment, that you end up.

667
00:32:07,360 --> 00:32:11,200
Speaker 7: With reluctant sellers. And right now, that's the environment we're in.

668
00:32:11,400 --> 00:32:13,960
Speaker 3: And what's making it a bit more difficult is there

669
00:32:14,080 --> 00:32:17,320
Speaker 3: is the prevailing wisdom that while rates are higher, they've

670
00:32:17,400 --> 00:32:18,400
Speaker 3: crested and.

671
00:32:18,480 --> 00:32:19,680
Speaker 7: Are likely to come down.

672
00:32:20,200 --> 00:32:22,960
Speaker 3: Now, if ultimately rates stay at these elevated levels and

673
00:32:23,040 --> 00:32:25,440
Speaker 3: they don't come down, then I think everyone's going to

674
00:32:25,480 --> 00:32:27,880
Speaker 3: make their peace with the new paradigm and you're going

675
00:32:27,920 --> 00:32:30,520
Speaker 3: to start to see more transactions. But as long as

676
00:32:30,560 --> 00:32:34,240
Speaker 3: there's an anticipation the rates are coming down, I think

677
00:32:34,280 --> 00:32:37,760
Speaker 3: you're going to see a lot of sellers withhold their

678
00:32:38,240 --> 00:32:41,240
Speaker 3: inventory from the marketplace and you're going to see a

679
00:32:41,360 --> 00:32:42,640
Speaker 3: more sluggish environment.

680
00:32:42,760 --> 00:32:45,120
Speaker 2: You also need financing, and we've heard some of the

681
00:32:45,160 --> 00:32:48,600
Speaker 2: banks pulling back somewhat because of regulatory other constraints. The

682
00:32:48,600 --> 00:32:51,040
Speaker 2: same time, private credit we hear about every single day,

683
00:32:51,520 --> 00:32:53,840
Speaker 2: is that providing the financing. Is there any shortage of

684
00:32:53,880 --> 00:32:54,640
Speaker 2: financing right now?

685
00:32:54,840 --> 00:32:58,200
Speaker 3: I think there's an abundance of capital. The issue is

686
00:32:58,240 --> 00:33:01,520
Speaker 3: it's more costly capital. And when it's more costly capital,

687
00:33:01,600 --> 00:33:05,080
Speaker 3: prices need to adjust to the fact that you need

688
00:33:05,200 --> 00:33:08,560
Speaker 3: to take on a much higher interest burden. And it

689
00:33:08,720 --> 00:33:11,760
Speaker 3: used to be that you could leverage yourself at four

690
00:33:11,840 --> 00:33:14,840
Speaker 3: or five six times, and in a low interest rate environment,

691
00:33:14,960 --> 00:33:18,040
Speaker 3: the interest coverage worked just fine. Now, all of a sudden,

692
00:33:18,040 --> 00:33:20,800
Speaker 3: you do that math with rates meaningfully higher, and you

693
00:33:20,880 --> 00:33:24,120
Speaker 3: need to put more equity into deals, which lowers returns.

694
00:33:24,520 --> 00:33:27,480
Speaker 3: And the only way that works is you need lower prices.

695
00:33:27,560 --> 00:33:31,400
Speaker 3: But there's an abundance of capital. Interestingly, money is flowing

696
00:33:31,440 --> 00:33:35,920
Speaker 3: into credit funds from all all parts, and the reason

697
00:33:36,000 --> 00:33:38,320
Speaker 3: for that is there's a general sense that over time

698
00:33:39,240 --> 00:33:42,320
Speaker 3: rates are coming down and if you get in now

699
00:33:42,480 --> 00:33:45,880
Speaker 3: and you could ride that rate travel down, you're going

700
00:33:45,920 --> 00:33:49,240
Speaker 3: to end up making hefty profits on your credit.

701
00:33:49,360 --> 00:33:52,680
Speaker 7: So credit is in demand.

702
00:33:53,200 --> 00:33:54,719
Speaker 3: There isn't a lot of M and A right now,

703
00:33:54,880 --> 00:33:58,280
Speaker 3: so there's relatively little supply of new inventory. Most of

704
00:33:58,360 --> 00:34:02,520
Speaker 3: it is refinancings. Reds have collapsed. The issue is just

705
00:34:02,600 --> 00:34:07,560
Speaker 3: the absolute rate is too high given the current environment.

706
00:34:07,800 --> 00:34:10,319
Speaker 3: And I as I said before, one or two things

707
00:34:10,360 --> 00:34:11,920
Speaker 3: are going to happen. Either rates are going to travel

708
00:34:12,000 --> 00:34:15,120
Speaker 3: back down, in which case we'll get on stuck, or

709
00:34:15,200 --> 00:34:17,759
Speaker 3: there's going to be a growing sense that this is

710
00:34:17,840 --> 00:34:21,000
Speaker 3: the new normal, and folks will will make their peace with.

711
00:34:21,080 --> 00:34:22,239
Speaker 2: Them as as it were.

712
00:34:22,440 --> 00:34:24,040
Speaker 7: Yes, exactly the way to say.

713
00:34:24,080 --> 00:34:26,040
Speaker 2: Paul Talbman will be staying with us as we turn

714
00:34:26,080 --> 00:34:28,480
Speaker 2: to spin offs and whether we've seen the high watermark

715
00:34:28,600 --> 00:34:32,399
Speaker 2: poor conglomerates. That's coming up next on Wall Street Week

716
00:34:32,560 --> 00:34:42,880
Speaker 2: on Bloomberg. This is Wall Street Week. I'm David Weston

717
00:34:42,920 --> 00:34:45,480
Speaker 2: and Paul Talban of PGAT Partners has stayed with us.

718
00:34:45,480 --> 00:34:47,640
Speaker 2: SA Paul, let's talk about something you're very active, and

719
00:34:47,880 --> 00:34:50,360
Speaker 2: that is some of the spinoff business, including Geve Vernovo

720
00:34:50,440 --> 00:34:52,200
Speaker 2: one that we know something about. But you've been in

721
00:34:52,320 --> 00:34:54,040
Speaker 2: quite a few of these. What's going on right now

722
00:34:54,120 --> 00:34:55,839
Speaker 2: with these companies breaking up and spinning off.

723
00:34:56,360 --> 00:35:02,280
Speaker 3: Look, the reality is that more focused company achieve better results.

724
00:35:03,040 --> 00:35:06,040
Speaker 3: And the way you get focus is you shrink the

725
00:35:06,120 --> 00:35:10,000
Speaker 3: mission and you're able to better allocate capital better and

726
00:35:10,120 --> 00:35:13,319
Speaker 3: center employees have everyone feel as if what they're doing

727
00:35:13,480 --> 00:35:16,759
Speaker 3: is the main event, that their mission critical and more

728
00:35:16,840 --> 00:35:20,359
Speaker 3: focus does drive greater returns. And when you have these

729
00:35:20,480 --> 00:35:23,719
Speaker 3: four flung conglomerates, which really is a throwback to a

730
00:35:23,800 --> 00:35:27,719
Speaker 3: different era, this notion of diversification, you end up making

731
00:35:27,800 --> 00:35:33,160
Speaker 3: inefficient capital allocations. The company tends not to benefit from

732
00:35:33,960 --> 00:35:37,200
Speaker 3: the stars in the portfolio when those assets are in

733
00:35:37,320 --> 00:35:40,200
Speaker 3: favor because there are other parts of the portfolio that

734
00:35:40,280 --> 00:35:43,320
Speaker 3: are out of favor. You end up with a less

735
00:35:43,640 --> 00:35:47,239
Speaker 3: competitive cost of capital, and then you've got shareholders who

736
00:35:47,320 --> 00:35:51,080
Speaker 3: are frustrated, employees who are frustrated, boards who are frustrated,

737
00:35:51,160 --> 00:35:55,319
Speaker 3: and increasingly there's a sense that let the shareholders, let

738
00:35:55,440 --> 00:35:59,719
Speaker 3: them diversify, let them construct their own portfolio. But pure

739
00:35:59,719 --> 00:36:03,840
Speaker 3: play are clearly in favor, and they command premium valuations.

740
00:36:03,920 --> 00:36:06,120
Speaker 2: So the pure plays are in favor. Is it a

741
00:36:06,239 --> 00:36:08,600
Speaker 2: fad or is it a permanent structural phenomenal because we

742
00:36:08,719 --> 00:36:10,480
Speaker 2: had in the past times when we're going to put

743
00:36:10,480 --> 00:36:12,839
Speaker 2: together these conglomerates as big as possible, then we broke

744
00:36:12,840 --> 00:36:14,120
Speaker 2: them up. But it feels like it sort of goes

745
00:36:14,160 --> 00:36:16,360
Speaker 2: back and forth and back and forth. Or are there

746
00:36:16,400 --> 00:36:18,760
Speaker 2: structural factors that may be putting in one direction.

747
00:36:19,000 --> 00:36:21,560
Speaker 3: Well, look, I would I would never underestimate Wall Street's

748
00:36:21,600 --> 00:36:24,800
Speaker 3: ability to come full circle on any issue or any trend.

749
00:36:25,320 --> 00:36:27,959
Speaker 3: So I hesitate to say we won't see those days again.

750
00:36:28,520 --> 00:36:31,200
Speaker 3: I think what's different now is you have more vocal

751
00:36:31,400 --> 00:36:37,560
Speaker 3: shareowners who are much more clear in their disdain for

752
00:36:37,760 --> 00:36:43,040
Speaker 3: companies to just simply create diversification or size without purpose.

753
00:36:43,520 --> 00:36:45,880
Speaker 3: And I think that probably is a governor that didn't

754
00:36:45,960 --> 00:36:49,120
Speaker 3: exist a decade ago or two decades ago. So you've

755
00:36:49,160 --> 00:36:52,480
Speaker 3: got much more in tune boards of directors, you have

756
00:36:52,760 --> 00:36:58,120
Speaker 3: much more vocal shareowners than before. The one cautionary tale

757
00:36:58,200 --> 00:37:01,759
Speaker 3: to that, David, is if you continue to have a

758
00:37:02,560 --> 00:37:08,760
Speaker 3: FTC and a DOJ, that's going to block horizontal deals

759
00:37:09,600 --> 00:37:12,520
Speaker 3: and they're going to prevent companies from getting bigger. I

760
00:37:12,719 --> 00:37:16,239
Speaker 3: suspect that at some point companies are going to just

761
00:37:16,360 --> 00:37:20,720
Speaker 3: it's a natural, a natural tendency to look at deals

762
00:37:21,000 --> 00:37:23,920
Speaker 3: that can get regulatory approval. They may not be the

763
00:37:24,040 --> 00:37:27,880
Speaker 3: right deals, but I can see if you're frustrated continuously

764
00:37:28,600 --> 00:37:31,719
Speaker 3: trying to get deals done in your space and you're

765
00:37:31,760 --> 00:37:34,560
Speaker 3: trying to grow your business, that you then look to

766
00:37:34,760 --> 00:37:38,880
Speaker 3: diversifying transactions. But my hope is that companies remain focused

767
00:37:38,920 --> 00:37:39,440
Speaker 3: on the mission.

768
00:37:39,640 --> 00:37:42,120
Speaker 2: So start first with the efficient part of the capital markets.

769
00:37:42,280 --> 00:37:44,400
Speaker 2: How much of this because the capital markets have become global,

770
00:37:44,400 --> 00:37:46,600
Speaker 2: they become much more efficient, so the capital goes to

771
00:37:46,640 --> 00:37:48,399
Speaker 2: where it belongs, if I can put it that way,

772
00:37:48,600 --> 00:37:50,279
Speaker 2: much more quickly than they did back, for example, in

773
00:37:50,360 --> 00:37:52,400
Speaker 2: the seventies or eighties. How much of that is driving

774
00:37:52,520 --> 00:37:55,720
Speaker 2: some of this splitting up into more focused, perhaps smaller companies.

775
00:37:55,920 --> 00:37:58,359
Speaker 3: Look, clearly, we're in a world that's speeding up, it's

776
00:37:58,440 --> 00:38:01,920
Speaker 3: not slowing down, and companies need to have a currency

777
00:38:02,000 --> 00:38:06,040
Speaker 3: that's competitive. And in many parts of the world you

778
00:38:06,160 --> 00:38:09,279
Speaker 3: have companies who are listed outside the United States who

779
00:38:09,440 --> 00:38:12,040
Speaker 3: enjoy a cost or theyn't enjoy they're burdened by a

780
00:38:12,120 --> 00:38:15,719
Speaker 3: cost of capital disadvantage, and that's an issue. Then you

781
00:38:15,840 --> 00:38:19,120
Speaker 3: have here in the United States and elsewhere conglomerates who

782
00:38:19,200 --> 00:38:21,680
Speaker 3: are not getting credit for all of the assets that

783
00:38:21,760 --> 00:38:24,480
Speaker 3: are all housed under one roof. And as they're competing

784
00:38:24,560 --> 00:38:27,959
Speaker 3: for other assets against pure play companies with a higher

785
00:38:28,040 --> 00:38:31,640
Speaker 3: flying currency, the trades that are hire multiple they're at

786
00:38:31,640 --> 00:38:34,960
Speaker 3: a competitive disadvantage. So I think there's a necessity to

787
00:38:35,160 --> 00:38:38,240
Speaker 3: making sure that you're always front footed. So what's different

788
00:38:38,280 --> 00:38:41,080
Speaker 3: now from a generation to go is people are using

789
00:38:41,080 --> 00:38:44,920
Speaker 3: their currency. Companies are using their currency. It's a competitive asset,

790
00:38:45,280 --> 00:38:47,320
Speaker 3: and you need to make sure it doesn't become a liability.

791
00:38:47,480 --> 00:38:48,160
Speaker 7: That's driving this.

792
00:38:48,680 --> 00:38:51,360
Speaker 3: And the second is you have less patient capital today

793
00:38:51,840 --> 00:38:54,680
Speaker 3: who's not willing to take comfort in the fact that

794
00:38:54,760 --> 00:38:57,920
Speaker 3: while the stock doesn't trade well, the underlying assets are

795
00:38:57,960 --> 00:39:00,360
Speaker 3: worth a lot. They want to see the underlying asset

796
00:39:00,520 --> 00:39:02,399
Speaker 3: values reflected in the share price.

797
00:39:02,480 --> 00:39:05,040
Speaker 2: Does it also redown to the shareholders benefit of potentially

798
00:39:05,040 --> 00:39:06,920
Speaker 2: I remember talking to Larry C. Calp that you represented

799
00:39:06,960 --> 00:39:09,320
Speaker 2: with the ge Ornovo's been a saying, look at some

800
00:39:09,360 --> 00:39:11,600
Speaker 2: people want to really back healthcare, some people want to

801
00:39:11,960 --> 00:39:14,440
Speaker 2: back energy, some people want to like aviation. And when

802
00:39:14,480 --> 00:39:16,279
Speaker 2: we had them all together, you had to make a choice.

803
00:39:16,719 --> 00:39:18,560
Speaker 2: Right now, you can go to one or the other,

804
00:39:18,680 --> 00:39:21,200
Speaker 2: depending on which one you like. Is it actually more power?

805
00:39:21,280 --> 00:39:22,480
Speaker 2: Does a lot of shareholders hand?

806
00:39:22,880 --> 00:39:25,000
Speaker 3: It's all of those things right now. You know, shareowners

807
00:39:25,040 --> 00:39:28,520
Speaker 3: can diversify themselves. If you own a healthcare stock and

808
00:39:28,600 --> 00:39:30,319
Speaker 3: you want to be in airspace as well, you can

809
00:39:30,360 --> 00:39:34,239
Speaker 3: buy another pure play company and create your own synthetic conglomerate.

810
00:39:34,320 --> 00:39:35,120
Speaker 7: That's the first point.

811
00:39:35,520 --> 00:39:38,799
Speaker 3: So all of this notion of diversification, which was part

812
00:39:38,840 --> 00:39:41,680
Speaker 3: of you know, financial theory in the seventies and eighties

813
00:39:41,719 --> 00:39:45,800
Speaker 3: and probably goes back to the sixties, that's been debunked,

814
00:39:45,840 --> 00:39:49,279
Speaker 3: which is shareowners can create their own diversification. Second thing

815
00:39:49,480 --> 00:39:53,120
Speaker 3: is when you're in very large organizations that do many things,

816
00:39:53,560 --> 00:39:56,640
Speaker 3: oftentimes there's not a sense of purpose and an organizing

817
00:39:56,719 --> 00:39:59,440
Speaker 3: principle for the employees and for the company to have

818
00:39:59,560 --> 00:40:00,480
Speaker 3: a clear mission.

819
00:40:01,080 --> 00:40:01,720
Speaker 7: That's different.

820
00:40:01,800 --> 00:40:03,799
Speaker 3: So I think studies have shown that you get better

821
00:40:04,000 --> 00:40:08,160
Speaker 3: operating performance. It's not just financial alchemy. You get better

822
00:40:08,320 --> 00:40:12,640
Speaker 3: operating performance in a focused organization where what you do

823
00:40:12,920 --> 00:40:15,680
Speaker 3: is mission critical. And I think GE is an incredible

824
00:40:15,719 --> 00:40:18,680
Speaker 3: success story. Larry Colp and that team have done an

825
00:40:18,680 --> 00:40:21,840
Speaker 3: extraordinary job. If you look at where they are today

826
00:40:22,000 --> 00:40:25,719
Speaker 3: versus where they traded, stock is up I think five

827
00:40:25,840 --> 00:40:30,840
Speaker 3: folds from the depths for GE, and the combined market

828
00:40:30,920 --> 00:40:35,360
Speaker 3: capitalization of those three entities is approaching three hundred billion dollars.

829
00:40:35,440 --> 00:40:38,279
Speaker 3: It's extraordinary what they've been able to do, but it

830
00:40:38,360 --> 00:40:41,839
Speaker 3: starts with operating performance and then it translates into being

831
00:40:42,280 --> 00:40:45,520
Speaker 3: able to get that value reflected in the public markets.

832
00:40:45,760 --> 00:40:48,440
Speaker 2: You mentioned one of the potential impediments to sort of

833
00:40:48,440 --> 00:40:51,560
Speaker 2: a more efficient allocation of capital is regulatory potentially, and

834
00:40:51,640 --> 00:40:53,719
Speaker 2: you mentioned the FTC and Department of Justice, but they're

835
00:40:53,760 --> 00:40:55,920
Speaker 2: not the only ones in the world. I mean European

836
00:40:57,960 --> 00:41:00,279
Speaker 2: Common Market that EU has its own competion is what

837
00:41:00,400 --> 00:41:03,839
Speaker 2: the UK does, China does, Japan does. So are those

838
00:41:04,080 --> 00:41:07,080
Speaker 2: similarly potential impediments to what you need to get done.

839
00:41:09,239 --> 00:41:13,640
Speaker 3: The complexity is multiplying, you know, it's a multiplicative complexity

840
00:41:13,719 --> 00:41:17,720
Speaker 3: because these are global companies who have global customer bases.

841
00:41:17,840 --> 00:41:19,799
Speaker 7: They operate almost everywhere in the world.

842
00:41:19,880 --> 00:41:23,040
Speaker 3: The regulatory approvals they need need to come from the EU,

843
00:41:23,160 --> 00:41:27,080
Speaker 3: the UK, China, the United States. You've got all sorts

844
00:41:27,080 --> 00:41:31,359
Speaker 3: of different issues, protectionist issues, you've got trade wars, you've

845
00:41:31,440 --> 00:41:36,000
Speaker 3: got a sense of what's national security issues. You've got

846
00:41:36,040 --> 00:41:42,040
Speaker 3: the SAFIAT issues in the US, you've got consistent concerns elsewhere.

847
00:41:42,440 --> 00:41:44,719
Speaker 3: And for global companies to be able to navigate all

848
00:41:44,719 --> 00:41:48,560
Speaker 3: of that, even for those transactions that should be approved

849
00:41:48,680 --> 00:41:51,880
Speaker 3: and ultimately are approved, it's just taking longer and that

850
00:41:52,000 --> 00:41:55,520
Speaker 3: injects more risks. So it can be navigated, and you

851
00:41:55,600 --> 00:41:58,120
Speaker 3: need to be thoughtful about it. And lots of deals

852
00:41:58,160 --> 00:42:01,279
Speaker 3: get done and most deals that get announced do not

853
00:42:01,400 --> 00:42:05,279
Speaker 3: get successfully challenged. The challenge, though, is you never know

854
00:42:05,520 --> 00:42:08,160
Speaker 3: whether you're going to be in the crosshairs, whether you're

855
00:42:08,239 --> 00:42:12,080
Speaker 3: the collateral damage, because the regulators aren't really looking at

856
00:42:12,120 --> 00:42:15,840
Speaker 3: your transaction, they're trying to just send a signal that

857
00:42:16,400 --> 00:42:19,279
Speaker 3: others in that industry should think twice before they bring

858
00:42:19,480 --> 00:42:23,000
Speaker 3: transactions to the marketplace. And I think that's one of

859
00:42:23,400 --> 00:42:26,239
Speaker 3: the ways in which we can explain why, in a

860
00:42:26,320 --> 00:42:29,400
Speaker 3: world that's speeding up, where there's a great desire to

861
00:42:29,760 --> 00:42:36,080
Speaker 3: constantly grow and develop one's company through acquisitions, divestitures, combinations,

862
00:42:36,480 --> 00:42:38,080
Speaker 3: why we haven't seen it in the numbers.

863
00:42:38,560 --> 00:42:39,239
Speaker 7: I think the.

864
00:42:40,040 --> 00:42:44,240
Speaker 3: Regulatory oversight from a global perspective has clearly weighed on activity.

865
00:42:44,600 --> 00:42:46,480
Speaker 2: Paul, it's really great, Javin wallstret Week, thank you so

866
00:42:46,600 --> 00:42:56,920
Speaker 2: much for being here. That's Paul Tullban of PGAT Partners. Finally,

867
00:42:57,160 --> 00:43:01,200
Speaker 2: one more thought. Artificial intelligence pioneer fafe A Lee says

868
00:43:01,280 --> 00:43:04,719
Speaker 2: that AI is everywhere. It's not that big scary thing

869
00:43:04,800 --> 00:43:08,120
Speaker 2: in the future. AI is here with us, And when

870
00:43:08,160 --> 00:43:10,400
Speaker 2: she says it is here with us, she means with

871
00:43:10,600 --> 00:43:13,040
Speaker 2: all of us, and in all sorts of different ways.

872
00:43:13,600 --> 00:43:16,200
Speaker 2: Our special contributor Larry Summers says that it's not like

873
00:43:16,280 --> 00:43:18,680
Speaker 2: the automation we've seen in the past, where machines took

874
00:43:18,719 --> 00:43:21,359
Speaker 2: over manual chores. It's something much more.

875
00:43:22,239 --> 00:43:26,960
Speaker 9: Most of the technological changes we've had before came for

876
00:43:28,239 --> 00:43:33,480
Speaker 9: working people doing relatively routine things. I have a suspicion

877
00:43:34,120 --> 00:43:37,640
Speaker 9: that AI is coming for the cognitive clash.

878
00:43:38,239 --> 00:43:41,360
Speaker 2: Private equity juggernaut. Blackstone says it can use AI to

879
00:43:41,480 --> 00:43:44,160
Speaker 2: sort through the wealth of data about past deals to

880
00:43:44,239 --> 00:43:47,040
Speaker 2: figure out which future deals are most likely to work.

881
00:43:47,560 --> 00:43:51,560
Speaker 1: Public market investing, which relies obviously on publicly available data,

882
00:43:52,840 --> 00:43:56,680
Speaker 1: that sort of data will be increasingly and further commoditized

883
00:43:56,760 --> 00:44:00,320
Speaker 1: in an AI world. And in contrast, the value you

884
00:44:00,400 --> 00:44:03,359
Speaker 1: a proprietary data and insights that you can clean from

885
00:44:03,360 --> 00:44:07,920
Speaker 1: a really large private market portfolio accumulator over many years

886
00:44:08,040 --> 00:44:11,160
Speaker 1: across many businesses that will only be further enhanced.

887
00:44:11,760 --> 00:44:15,080
Speaker 2: Besides building our portfolios, AI may end up building our

888
00:44:15,160 --> 00:44:16,560
Speaker 2: ships for us as well.

889
00:44:17,040 --> 00:44:18,800
Speaker 10: Now, I was listening to Jenson Wang speak at a

890
00:44:18,840 --> 00:44:20,840
Speaker 10: conference the other day, and he showed how they can

891
00:44:20,880 --> 00:44:24,680
Speaker 10: build a boat through AI, a very complicated supertiker, and

892
00:44:24,719 --> 00:44:27,240
Speaker 10: then he said, we can build the factory that builds

893
00:44:27,280 --> 00:44:30,399
Speaker 10: the voat, and then we'll build the robots that build

894
00:44:30,440 --> 00:44:31,440
Speaker 10: the boat in the factory.

895
00:44:31,719 --> 00:44:32,840
Speaker 5: And I'm like, where are the workers?

896
00:44:33,560 --> 00:44:36,480
Speaker 2: What do we do? AI can enhance our medical care

897
00:44:36,560 --> 00:44:38,879
Speaker 2: by cutting through some of what we go through. Now

898
00:44:39,000 --> 00:44:40,240
Speaker 2: that doesn't help us get.

899
00:44:40,120 --> 00:44:43,800
Speaker 11: Better effective in that hopefully we'll eliminate a lot of

900
00:44:43,960 --> 00:44:48,919
Speaker 11: unnecessary testing, a lot of procedures or activities that don't

901
00:44:49,040 --> 00:44:51,840
Speaker 11: directly link to the well being of the patient.

902
00:44:52,200 --> 00:44:55,440
Speaker 2: AI may even provide companionship for us in our old age.

903
00:44:55,880 --> 00:44:58,200
Speaker 2: The New York State Office for the Aging has already

904
00:44:58,280 --> 00:45:01,800
Speaker 2: launched a pilot program giving some across the state AI

905
00:45:02,080 --> 00:45:05,359
Speaker 2: robots free of charge. They tell corny jokes, they take

906
00:45:05,400 --> 00:45:08,279
Speaker 2: seniors on virtual trips, and generally hang out with them

907
00:45:08,320 --> 00:45:10,880
Speaker 2: when no one else is there. Those in the program

908
00:45:11,000 --> 00:45:15,000
Speaker 2: are reporting a ninety five percent drop in loneliness. So

909
00:45:15,239 --> 00:45:18,359
Speaker 2: I suppose it was inevitable that generative AI would enter

910
00:45:18,440 --> 00:45:21,719
Speaker 2: our love lives as well. The founder of the online

911
00:45:21,800 --> 00:45:25,640
Speaker 2: dating app Bumble last week described an AI dating concierge

912
00:45:26,040 --> 00:45:29,000
Speaker 2: that could go out on dates with others AI avatars

913
00:45:29,320 --> 00:45:32,319
Speaker 2: and scope things out, seeing whether the relationship is worth

914
00:45:32,400 --> 00:45:35,680
Speaker 2: venturing out on an actual physical date with the real person.

915
00:45:36,239 --> 00:45:39,040
Speaker 12: There is a world where your dating concierge could go

916
00:45:39,120 --> 00:45:41,520
Speaker 12: and date for you with other dating concierge.

917
00:45:42,600 --> 00:45:44,160
Speaker 5: No, no, truly, and then you.

918
00:45:44,200 --> 00:45:46,960
Speaker 12: Don't have to talk to six hundred people and all

919
00:45:47,040 --> 00:45:49,399
Speaker 12: of San Francisco for you say, these are the three

920
00:45:49,440 --> 00:45:50,640
Speaker 12: people you really ought to meet.

921
00:45:51,000 --> 00:45:53,239
Speaker 2: But why leave it there? Why not take it all

922
00:45:53,320 --> 00:45:55,880
Speaker 2: the way and simply leave it up to our avatars

923
00:45:55,960 --> 00:45:58,719
Speaker 2: to figure out the mysteries of courtship and mating and

924
00:45:58,800 --> 00:46:01,480
Speaker 2: commitment and save us all all the trouble. Open AI

925
00:46:01,680 --> 00:46:03,560
Speaker 2: gave us a taste of this and announcing it's all

926
00:46:03,640 --> 00:46:07,160
Speaker 2: new Chack GPT four this week, complete with a voice

927
00:46:07,200 --> 00:46:10,000
Speaker 2: that some have said sounds a lot like Scarlett Johansson

928
00:46:10,239 --> 00:46:12,600
Speaker 2: playing the role of an AI operating system.

929
00:46:12,360 --> 00:46:17,839
Speaker 12: In her I'm learning everything about everything, lovely look the world.

930
00:46:19,480 --> 00:46:21,640
Speaker 2: But then again, you likely won't have to pay at

931
00:46:21,680 --> 00:46:24,880
Speaker 2: alimony if things don't work out. That does it for

932
00:46:24,960 --> 00:46:27,600
Speaker 2: this episode of Wall Street Week, I'm David Weston. See

933
00:46:27,640 --> 00:46:28,239
Speaker 2: you next week.