Speaker 1: Bloomberg Audio Studios, podcasts, radio news, The.
Speaker 2: Slovak Prime Minister is shot, Memestock's return and inflation takes
Speaker 2: a half step back. This is Bloomberg Wall Street Week.
Speaker 2: I'm David weston this week. Paul Talban PJT Partners on
Speaker 2: what's holding.
Speaker 3: M and A back, The current view on anti trust
Speaker 3: is clearly having a chilling effect.
Speaker 2: And Elizabeth Career of JD Power on what difference the
Speaker 2: new tariffs on Chinese evs will.
Speaker 4: Make consumers are looking for lower cost vehicles within the
Speaker 4: segments of their preference.
Speaker 2: We start with the CPI numbers out on Wednesday, giving
Speaker 2: investors a sigh of relief when it comes to inflation.
Speaker 2: To explain the numbers in the larger context of the
Speaker 2: economy and monetary policy. Welcome back now, Rick Reader. He's
Speaker 2: Blackrock Chief investment Officer for Global fixed Income and head
Speaker 2: of the Global Allocation Investment Team. Rick, always a treat
Speaker 2: to have you on Wall Street Week.
Speaker 5: Thanks for having me.
Speaker 2: So let's start with the CPI number. As you saw
Speaker 2: what the markets have made out of it, they liked
Speaker 2: it a lot because they thought maybe inflation is coming down.
Speaker 6: What did you make out of those numbers, so the
Speaker 6: worst fears were allayed. I mean it was it wasn't
Speaker 6: that far from expectations. You know, the markets can tend
Speaker 6: to parse a couple of hundreds of basis point through
Speaker 6: our basis point to determine like it's better or worse.
Speaker 6: There were some things that were that were better there
Speaker 6: that we're encouraging, including you start to see some of
Speaker 6: the transportation services come down. Rent started to come down
Speaker 6: of it, So there's some encouraging things. It was pretty
Speaker 6: much on expectation, but there was a fear because we've
Speaker 6: had three months in a row of high numbers that
Speaker 6: maybe we're moving to a more normal, more stable environment.
Speaker 6: And by the way, it was contiguous to retail sales
Speaker 6: that were softer. Some of what you've seen play out
Speaker 6: in these earnings reports. There's definitely some consumer pullback. So
Speaker 6: the combination of N and PPI not being that bad,
Speaker 6: some stability, and then gosh, you're seeing some softness show up.
Speaker 6: That you've got a federal reserve that you know already
Speaker 6: raise the bar of hiking rates, but now you can
Speaker 6: you can start to think, can you get a cut
Speaker 6: or two done this year? And I think that in
Speaker 6: bold in that thesis.
Speaker 2: It's always in the media have a tendency to look
Speaker 2: at a number, how much is up or down? There
Speaker 2: are a lot of things under that number. Address one
Speaker 2: thing I've been curious about goods versus services because there's
Speaker 2: a different trend there and inflation. From the Fed's point
Speaker 2: of view, do they need both goods and services to
Speaker 2: come down? Because the one is going down, the other
Speaker 2: not so fast.
Speaker 6: So it's pretty remarkable. You know, we're moving to a
Speaker 6: service oriented economy. More money is being spent on services.
Speaker 6: But it's actually what's happening because goods prices have come
Speaker 6: down so much, it's allowing for disposable income to go
Speaker 6: into services. That's actually booing prices and services ironically. You know,
Speaker 6: I've said this over time, and I've used a bunch
Speaker 6: of examples. Like a price of a pair of tennis
Speaker 6: shoes is what it was twenty years ago. If you
Speaker 6: go to a tennis match, it's double what it used
Speaker 6: to be, So meaning services, goods come down service Thinking
Speaker 6: about an autos price of autos on relative basis, So
Speaker 6: what's happening for the Fed? Listen, you want to get
Speaker 6: the average, you want to get inflation down to around
Speaker 6: the two percent number. Their mandate is price stability is
Speaker 6: not two. If you're running two and a half, you know,
Speaker 6: core pcees now two eight. But it's pretty stable. We
Speaker 6: think it'll be pretty stable throughout the year if you've
Speaker 6: got a good economy nominal GDP. So if you take
Speaker 6: two eight of inflation, you get real GDP of two,
Speaker 6: you've got a nominal GDP of four and.
Speaker 5: A half to five. Pretty good. I mean, it's a
Speaker 5: pretty good environment.
Speaker 2: Some people have been surprised. I think that the economy
Speaker 2: has not reacted faster to five hundred basis points and
Speaker 2: interest rate increases. Some of that is because you can
Speaker 2: turn out the debts some people do. And one of
Speaker 2: the things that we've seen recently is a difference for
Speaker 2: households because you know what they own, their mortgage, which
Speaker 2: is a longer term thing, and the shorter term debt
Speaker 2: such as credit cards and auto payments.
Speaker 6: I'm not certain that raising interest rates actually brings down inflation.
Speaker 6: In fact, I would lay out an argument that I actually,
Speaker 6: if you cut interest rates, you'd bring down inflation. Why
Speaker 6: is that exactly to your point, look at what's happening now.
Speaker 6: Interest expense is growing, has now eclipsed mortgage payments. Lower
Speaker 6: income who much higher percentage of their of their net
Speaker 6: worth is in the debt, credit cards, student loans, auto finance, etc.
Speaker 6: What's happened is you've raised the rate and that has
Speaker 6: created a real impact. But the other side of it
Speaker 6: is you actually have an economy because of this massive
Speaker 6: transfer from the public sector, from the government to the
Speaker 6: private sector. People are higher income, middle to higher income
Speaker 6: are now getting a big benefit from these interest rates,
Speaker 6: and that's flowing into those are the people that spend
Speaker 6: an aggregate on services. So there's an ironic thing that
Speaker 6: I've never seen, nobody's ever seen in history, big transfer
Speaker 6: of money from the government into the private sector. The
Speaker 6: private sector now is a creditor versus a debtor in
Speaker 6: terms of the the big pocket of wealth. It's what's
Speaker 6: happening those lower income. So there's the chart we show around.
Speaker 6: Look at restaurants, high end restaurants killing it, low end
Speaker 6: restaurants or low income having a really tough time. You
Speaker 6: saw it in all the earnings in this last quarter.
Speaker 6: Really big deal today. And then the other side of
Speaker 6: it is not as lower income getting hurt. Not only
Speaker 6: is small business getting hurt, local banks getting hurt in
Speaker 6: part of why I think they need to bring the
Speaker 6: rate down.
Speaker 5: But you look at companies today.
Speaker 6: Normally when you raise the interest rate, companies pull back.
Speaker 5: Companies term their dead out.
Speaker 6: Because we went through not only a transfer of money
Speaker 6: from the government to the private sector, we kept interest
Speaker 6: rates down for so long. Seventy percent of the high
Speaker 6: youd market termed their dead out when the fundsrate was
Speaker 6: under one. They have no debt company, they have no
Speaker 6: real maturity wall. So think about what the interest rate
Speaker 6: does you raise it, it doesn't really matter for companies.
Speaker 6: In fact, companies are sitting in a lot of cash,
Speaker 6: so they're actually getting the benefit of higher rates. So
Speaker 6: point being, I think the Federal Reserve can get that
Speaker 6: rate down from five and three a's.
Speaker 5: Even if you got it to four four and a half.
Speaker 6: Still restrictive relative to a two eight core PCE.
Speaker 5: And I just am not.
Speaker 6: It's not clear to me you've raised rates five hundred
Speaker 6: basis points, does it really impact inflation? And I would
Speaker 6: argue at a certain level it actually maybe is actually
Speaker 6: helping keep inflation high in a because we've never seen
Speaker 6: this in history.
Speaker 5: Because of those other influences.
Speaker 2: So you think it's possible if they cut rates, it
Speaker 2: actually might deter inflation rather than's go around.
Speaker 6: By the way, I throw one other thing, there's been
Speaker 6: an aging of the population that we've never seen before
Speaker 6: and a wealth creation at the higher end. It's actually
Speaker 6: if you break down the demographic today, there's been an
Speaker 6: incredible growth of the savings and the spending at old
Speaker 6: from older people at fifty five and above. It's fascinating
Speaker 6: what's happening. By the way, if you keep the real
Speaker 6: rate high, huge benefit to those people. They're turning around spending.
Speaker 6: So why is inflation high in things like health insurance?
Speaker 6: Why is inflation high in number of these service sectors,
Speaker 6: auto insurance, etc. They're sticky, they're unresponsible interest rates, and
Speaker 6: people are spending. Older people middle to high income are
Speaker 6: spending and are keeping that service level inflation at high levels.
Speaker 2: Is it a good thing for fixed income investors right now?
Speaker 2: What is the timing good right now?
Speaker 6: So I would say I don't think rates are going
Speaker 6: to come down. You know we're gonna have this incredible
Speaker 6: rate drop of anytime soon. I do think the world
Speaker 6: is in more of an easing cycle. You look at
Speaker 6: obviously in Europe, UK moving faster, emerging markets, many countries moving,
Speaker 6: so Argentina just dropped the rate in a radical way.
Speaker 5: So that is healthy. But there's something in fixing i'm
Speaker 5: not I think is extremely unique. You can create income.
Speaker 5: I mean for years, decades we were sitting at rates
Speaker 5: or a zero.
Speaker 6: You had to buy dicey emerging markets, you had to
Speaker 6: buy dicey parts of the high yield market. Today you
Speaker 6: can create a six six and a half seven percent yield.
Speaker 6: And so what you're seeing is people like, gosh, if
Speaker 6: you can get me six and a half without a
Speaker 6: lot of volatility. I own equities, I get volatility there,
Speaker 6: I'm okay with it. Give me my fixing, Come get
Speaker 6: me a lot of yield without the same volatility. That's
Speaker 6: a pretty unique point time. I've said it's the golden
Speaker 6: era of fixed inc. I'm not because rates are going
Speaker 6: to come down, but you can build a lot of
Speaker 6: yield in the portfolios.
Speaker 2: So explain something to me I don't understand as a
Speaker 2: fixed income investor in a marketplace. Normally, if that's true,
Speaker 2: a lot of money will crowd into fixed income and
Speaker 2: that should drive their rates down. Actually, right, So you
Speaker 2: don't get as much out of them. Why isn't the
Speaker 2: market actually taking a lot of that benefit out of
Speaker 2: the investment fixed income.
Speaker 6: So it's a great question. So there's two things happening.
Speaker 6: One US government has a huge amount of debt that
Speaker 6: they've got to keep issuing. And I've said that four
Speaker 6: hundred billion a week of bills, one hundred and billion
Speaker 6: a week on average of coupon issue once from the cup.
Speaker 6: So there's a ton of money that's coming in. You've
Speaker 6: got a federal reserve that's keeping the front end of
Speaker 6: the curve. I would argue too high today, but high today.
Speaker 6: So those are are obviously keeping the yields where they are.
Speaker 6: Companies should be borrowing two hundred to three hundred base
Speaker 6: points lower yield. You know, given we talk about their
Speaker 6: credit quality is superb today, they're not. Because service level
Speaker 6: inflation is high. It keeps the rate high. And so
Speaker 6: as an investor or anybody today who gets to be
Speaker 6: a lender, you're getting to buy credit asset's a couple
Speaker 6: hundred base points cheaper than you really should, even though
Speaker 6: the spreads are tight.
Speaker 5: It's just because a risk free rate, because it's given
Speaker 5: how much where treasuries are it's it's so high today.
Speaker 2: One last one on the investment front, and that is
Speaker 2: the first thing you talked about, the demand from the
Speaker 2: treasury there to borrow a lot of money. We here
Speaker 2: increasingly for all wide registers, Ray Value, Jamie Dimond. Everyone
Speaker 2: talks about the fact that we are really borrowing a
Speaker 2: lot of money, and sooner or later there's going to
Speaker 2: be a problem. We talked to Paul Ryan, somebody you
Speaker 2: know well last week who said he thinks it's not
Speaker 2: at all unlikely that the next president, whoever it is,
Speaker 2: will face perhaps a real debt crisis in the form
Speaker 2: of a failed treasury auction. Do you see that on
Speaker 2: the horizon.
Speaker 5: So those are all smart people. Can I just say agree?
Speaker 6: And so yeah, I think that debt's too big, and
Speaker 6: I think we're not going to address the size of
Speaker 6: the debt in the country today.
Speaker 5: And I think over the.
Speaker 6: Next year or two, I think you'll see auctions thirty
Speaker 6: or auctions that I'll have a hard time clear in
Speaker 6: the market. It's just it's too much debt at the
Speaker 6: same point in time most countries, and you know, you
Speaker 6: think about China, Japan A.
Speaker 5: You know they have alternatives.
Speaker 6: They're funding more domestic priorities versus the United States debt,
Speaker 6: and so I think we have to be pretty careful
Speaker 6: about that. There's a lot of debt coming. There'll be
Speaker 6: a point in time if the Fed is moving towards
Speaker 6: lowering rates, you feel better about we'll be able to
Speaker 6: fund it.
Speaker 5: People are comfortable coming in. I'm not going to lose money.
Speaker 6: There's going to be a point in time where rates
Speaker 6: will move up again and people say, you know, I
Speaker 6: don't want it. Who's going to fund it? And so
Speaker 6: I think what will happen is more we'll have to
Speaker 6: go on the Fed's balance sheet again. Think about Japan,
Speaker 6: what happened to the currency Listen. I think we got
Speaker 6: to be careful about it, and I think policy makers
Speaker 6: are going to need to address it over the next
Speaker 6: couple of years.
Speaker 2: Okay, Rick Reader is going to be staying with us
Speaker 2: as we turn to the latest developments in the market,
Speaker 2: including performance of his active fixed income ETF. That's going
Speaker 2: to be next down on Wall Street week on Bluebird.
Speaker 2: This is Wall Street. I'm David Weston. Rick Reader of
Speaker 2: Blackrock has stayed with us. So Rick, there are some
Speaker 2: larger forces at play right now in financial markets, and
Speaker 2: one of them is what I would call at least
Speaker 2: active ETFs. You have your own Blackrock Flexible Income BINK
Speaker 2: b A n C. I think we talked about when
Speaker 2: you first announced it on this program. How's it doing
Speaker 2: so far?
Speaker 7: So good?
Speaker 6: I mean, I think we've beaten the aggregate index by
Speaker 6: you know, since inception eight hundred base, which so for
Speaker 6: fixed income not equities.
Speaker 5: It's pretty good. It's pretty good. We're hanging in l right,
Speaker 5: you know.
Speaker 6: I think we're up this year, you know, the market
Speaker 6: where rates have moved higher and the only industries most
Speaker 6: of the industries are down.
Speaker 2: So I have no doubt that people are giving you
Speaker 2: money because you do a better job than the people do.
Speaker 2: So a lot of it's just on the merits, But
Speaker 2: what about larger forces. Why is so much money going
Speaker 2: to ets? And where's it coming from? Other ways? It
Speaker 2: just because there's that much more money to be invested,
Speaker 2: or is it coming out of other places?
Speaker 5: So a couple of things that are happening.
Speaker 7: You know.
Speaker 6: Now models have become so financial advisors that can create
Speaker 6: these models that can be very precise about where you invest,
Speaker 6: and gosh, I want to have X amount in yielding
Speaker 6: fixed income. I want to x amount in this type
Speaker 6: of technology equities. Maybe I'll take some alternatives, use some
Speaker 6: private credit, but the ability to be precise around I
Speaker 6: want active ETFs. Then I just want exposure to an
Speaker 6: index like I use passive ETFs in my funds all
Speaker 6: the time. I want to get in the highield really quickly.
Speaker 6: I can get in through an ETF. I want to
Speaker 6: buy the SMP through spy. I want to do it
Speaker 6: really quickly. The marriage of active and passive has become
Speaker 6: really beneficial to financial advisors. People want to build portfolios,
Speaker 6: and I just think that's going to grow. I think
Speaker 6: the whole moniker if it's an active ETF versus passive,
Speaker 6: I just think it's like, what is your mandate? What
Speaker 6: are you trying to achieve? And I just think that
Speaker 6: will continue to grow. And it's so handy for people.
Speaker 6: It's tax beneficial and they can move quickly when they
Speaker 6: want to alter their portfolio.
Speaker 2: Another thing that is a phenomenon right now and is
Speaker 2: growing the private market's betewually private credit. We've had private
Speaker 2: equity for some time, but private credit has really been
Speaker 2: growing dramatically. What do you make of that what's driving
Speaker 2: that right now?
Speaker 6: I mean, I think the biggest thing is, you know,
Speaker 6: if you take of so this before, there's forty seven
Speaker 6: hundred and fifty banks in the United States, and you know,
Speaker 6: when you you know, the dynamic recap rate slow, you
Speaker 6: had a lot of funding, there were a lot of
Speaker 6: commercial real estate funding, and then local banks regional mind
Speaker 6: or having a tougher time. There's a dearth of lending
Speaker 6: to what would be the traditional lending market. So whether
Speaker 6: it's corporate credit, real estate, you know, everyis oh my god,
Speaker 6: commercial real estate, and I want to touch it.
Speaker 5: I don't want to touch office.
Speaker 6: Office is tricky much of the office real estate markets.
Speaker 6: But there are things in hospitality, things in logistics, multifamily financing.
Speaker 6: So what's happened is because of the lending system today
Speaker 6: being when a lot of banks pulling back have to
Speaker 6: build capital, it's created this opportunity to create by the way,
Speaker 6: real yield because of whether risk free rate is, you
Speaker 6: can create double digit yields with you know, when you think, gosh,
Speaker 6: what do I want to get an equity? You know,
Speaker 6: if I can only get mid high teens and equities,
Speaker 6: if I can get in credit or real estate collateralized.
Speaker 6: If I can get load a mid double digit return
Speaker 6: yields mid load of mid teens yields, that's pretty darn attractive.
Speaker 2: One of the things we hear from people in private
Speaker 2: credit is it is a better model in that you
Speaker 2: have long money out and long money in. It's committed
Speaker 2: to you for a previous time, where banks, of course
Speaker 2: really substantially on deposits that can be withdrawn. Is that
Speaker 2: a better model in general or are there downsides that
Speaker 2: model as well? There's some places where that does not
Speaker 2: work so well.
Speaker 6: So listen, I mean a few other federal reserve and
Speaker 6: you're trying to manage velocity in the system and the
Speaker 6: lending dynamic and more leaves the banking system, your toolkit
Speaker 6: becomes more imprecise.
Speaker 5: In terms how you manage that. So that is that
Speaker 5: is that is a tricky part of it. Listen.
Speaker 6: I think that, like everything in life, some balance and
Speaker 6: some moderation, and I think it's quite frankly, I think
Speaker 6: it's a very positive evolution that.
Speaker 5: You have more of a match of asset liabilities.
Speaker 6: You think about financial christs and other times it's the
Speaker 6: mismatch of asset liabilities that creates real stress. So today
Speaker 6: I think that's more in balance. As the banks build
Speaker 6: capital through this period, you're creating a better buffer and
Speaker 6: better foundation. But so anyway, I think there's some positives.
Speaker 6: And by the way, I think, you know, we run
Speaker 6: a lot of funds that are daily liquidity. You just
Speaker 6: got to manage your asset liability mix. And I think
Speaker 6: for people, let's say, Gosh, I want to have stuff
Speaker 6: that I can move around quickly, and then I'm going
Speaker 6: to go into alternatives where I'm going to lock my
Speaker 6: money up. I think it's all about balance. And like
Speaker 6: my mom used to say, like everything in moderation is
Speaker 6: is good.
Speaker 2: US versus the rest of the world Europe, Japan, Asia,
Speaker 2: things like that. Right now, US seems to be placed.
Speaker 2: Everyone's going to as fasts they can. Is that likely
Speaker 2: to continue to think as you see the longer term trends.
Speaker 6: So I think there are so depends if you're doing
Speaker 6: debtor equity. Like I think the equity story in Japan
Speaker 6: is pretty interesting today. Money that used to go to
Speaker 6: China's going to Japan. Real technology, women in the workforce
Speaker 6: that are now have real wages. Japan from an equity
Speaker 6: out of use interesting India in equity is really you
Speaker 6: got to do sort of small to mid cap companies.
Speaker 6: Oftentimes India is interesting in the equity side. I think
Speaker 6: being a lender in Europe UK is interesting because you're
Speaker 6: not growing as fast. They've got to drop rates faster,
Speaker 6: inflation's coming down faster. So I like on the death
Speaker 6: side being more in Europe. On the equity side, being
Speaker 6: in some of these faster what I always call the rivers,
Speaker 6: the fast rivers a cash flow, and I think the
Speaker 6: fastest river at cash flow inequities in the US full
Speaker 6: stop technology.
Speaker 5: Evolution is I mean, what we're going through today. Everybody
Speaker 5: talks about AI.
Speaker 6: They don't talk about healthcare, biotech, you know, other parts
Speaker 6: of technology they're developing. Anyway, I still think in equity
Speaker 6: the fastest river a cash flow is in the is
Speaker 6: in the US.
Speaker 2: One last one. It's probably unfair. What's the biggest underpriced
Speaker 2: opportunity right now for an investor?
Speaker 5: Most underpriced opportunity? Listen about?
Speaker 6: You know, I think I think being boring in UH
Speaker 6: is is okay today, Like I've been doing this thirty
Speaker 6: thirty something years. I don't say the number, but today buildings,
Speaker 6: I mean, you know, if you can build six and
Speaker 6: a half to seven, that is unbelievable that we're not
Speaker 6: you know, two years from now. If even to say,
Speaker 6: remember we got to buy European as a dollar investor,
Speaker 6: you got to buy European investment in grade credit at
Speaker 6: five and a half to six.
Speaker 5: Remember we were lending the money at negative yields. Like
Speaker 5: that's pretty that's pretty good.
Speaker 6: And then listen, I you know, I think people underestimate
Speaker 6: how fast technology is changing. Like I think, you know,
Speaker 6: there's a you know we can talk about, you know,
Speaker 6: the videos, et cetera. Incredibly impressive. Boy, there's so many
Speaker 6: secondary and tertiary.
Speaker 5: Impacts of what's happening there. Like it's an exciting time.
Speaker 6: I mean, this is really we're watching commerce change sort
Speaker 6: of like you know, I've said it's like the Internet bubble,
Speaker 6: except for it's not a bubble because it's cash flow
Speaker 6: attached to it, and so it's a pretty exciting time.
Speaker 2: I think, Yeah, real company is making real money like
Speaker 2: the Internet bubble. Rick, it's always so great to have you.
Speaker 2: Thank you so much. That's Rick Reader of Black Rock.
Speaker 2: This is Wall Street Week. I'm David Weston. If inexpensive
Speaker 2: electric vehicles are the way to get Americans to switch.
Speaker 2: We're not going to get very many of them for China,
Speaker 2: as the Biden administration this week announced it would be
Speaker 2: raising the tariffs on EV's from China to over one
Speaker 2: hundred percent. To give us a sense of what this
Speaker 2: could mean for US consumers, we welcome back now, Elizabeth Kreer.
Speaker 2: She's JD Power Vice President Electric Vehicle Practice. Elizabeth, welcome back.
Speaker 2: Good to have you here. So, I guess my basic
Speaker 2: question is these electric vehicles from China are very inexpensive.
Speaker 2: Is it likely that Americans would buy them anyway? Is
Speaker 2: there an appetite for cheap Chinese evs?
Speaker 4: Well, the auto industry is a global industry, as you know,
Speaker 4: and all competition needs to be taken seriously. At the
Speaker 4: end of the day, the consumer decides. Consumers want choices,
Speaker 4: new technology, and value. The USV capacity has now died
Speaker 4: consumer demand for evs and we're starting to see conquest
Speaker 4: sales through price deals and incentives.
Speaker 8: Competition is expected to continue.
Speaker 4: To increase, with ten more evs hitting the US market
Speaker 4: this year, particularly in the mid size suv and truck segments.
Speaker 4: Suv and truck sales make up over eighty percent of
Speaker 4: the US market. In contrast, small cars make up less
Speaker 4: than one percent of the US market. The eleven thousand
Speaker 4: dollars China seagull would be in this small car segment.
Speaker 4: The Chevrolet Bolt, also a small car under twenty thousand
Speaker 4: dollars with federal tax incentives. During its peak, sold less
Speaker 4: than a half a percent of industry monthly retail sales.
Speaker 4: I'm not an expert in geo political decision making, but
Speaker 4: consumers are looking for lower cost vehicles within the segments
Speaker 4: of their preference.
Speaker 8: There is a void in the marketplace, and this is
Speaker 8: similar to the.
Speaker 4: Late nineteen eighties early nineteen nineties when Hyundai Ikia came
Speaker 4: to the u US market looking to fill the void.
Speaker 4: The weather low cost evs are first offered by domestic brands,
Speaker 4: Asian brands, European brands, or Chinese brands will have to
Speaker 4: wait and see, but there.
Speaker 8: Is a market for them.
Speaker 2: But as you just said, Elizabeth, within the segment they're
Speaker 2: interested in. It sounds like the segment that you Seagulls in,
Speaker 2: the really small, really inexpensive one that's not potentially that
Speaker 2: much or a threat to US automakers.
Speaker 8: That's correct. That's a very small segment.
Speaker 2: So you've been studying consumers and their reactions to electric vehicles.
Speaker 2: You actually had to report out at the end of March,
Speaker 2: and as I read that it isn't so much the
Speaker 2: price point as the charging stations. People really are invoking
Speaker 2: that as a reason to be hesitant.
Speaker 8: Absolutely.
Speaker 4: You know, we survey over two thousand new vehicle shoppers
Speaker 4: every month to gauge their interest in evs, and when
Speaker 4: we look at the top reasons for rejection those who
Speaker 4: say I am not interested in an EV, we see
Speaker 4: lack of charging station availability as the top reason for rejection,
Speaker 4: but purchase price.
Speaker 8: As the second. So that's where EV education comes into play.
Speaker 4: There is a learning curve to owning an EV, figuring
Speaker 4: out where to charge, how frequent to charge, how much
Speaker 4: to charge, and although for many charging may not truly
Speaker 4: be an issue in terms of availability, but perception is
Speaker 4: reality and charging is simply too much of an unknown
Speaker 4: for them. And same goes for price and understanding the
Speaker 4: total cost of ownership of owning an EV. Often the
Speaker 4: savings with the EV incentives and operating costs and maintenance
Speaker 4: for that matter, often offset that initial price. But again
Speaker 4: this needs to be explained to the average shopper. So infrastructure, price,
Speaker 4: education all very important.
Speaker 2: One last one, Elizabeth, if they need to feel comfortable
Speaker 2: about charging, what's going on right now with Tesla and
Speaker 2: Musk might not give them a lot of comfort because
Speaker 2: it looked like they laid off the entire division and
Speaker 2: then they sort of change their minds. Where are we
Speaker 2: right now with Tesla and the supercharging and have they
Speaker 2: really changed their course?
Speaker 4: This is potentially a big blow to the infrastructure build out.
Speaker 4: The supercharger network is the nation's largest and most reliable
Speaker 4: fast charging network. When NACS was adopted by non Tesla manufacturers,
Speaker 4: that helped address one of the most pressing needs in
Speaker 4: the EV space, which is increased availability of public charging.
Speaker 4: With more evs utilizing those superchargers, that is going to
Speaker 4: add to the congestion increasing weight times, which will be
Speaker 4: exacerbated with increased EV adoption. For now, supercharger has the
Speaker 4: highest reliability ninety five percent compared to only eighty one
Speaker 4: percent for non Tesla networks. With the mass layoff, it
Speaker 4: calls into question Tesla's commitment to growing the network and
Speaker 4: maintaining the reliability, and this move could also impact the
Speaker 4: brand's sales. Public charging availability is a primary driver of
Speaker 4: why consumers purchase Tesla based on our the ownership study. Similarly,
Speaker 4: based on our shopping survey, the number one reason people
Speaker 4: cross shop with Tesla is for the supercharger network. So
Speaker 4: the supercharger network move could impact the brand sales if
Speaker 4: customers no longer see the supercharger network as a brand differentiator.
Speaker 2: Elizabeth is always so helpful to talk to you about
Speaker 2: these things. Thank you so much. That's Elizabeth Career of
Speaker 2: JD Power. Coming up. We're told that M and A
Speaker 2: is on its way back, but when and what's keeping
Speaker 2: it the less?
Speaker 7: Paul J.
Speaker 2: Talvman, he's chairman and CEO of PJT Partners.
Speaker 7: M and A volumes continue to be soft.
Speaker 2: That's next on Wall Street Week on Bloomberg. This is
Speaker 2: Wall Street Week. I'm David weston higher interest rates and
Speaker 2: uncertainty over where they are headed. Put some mergers and
Speaker 2: acquisitions on hold, but they appear to be on their
Speaker 2: way back. Perhaps take us through how far they've come.
Speaker 2: We're welcome now. Paul J. Taubman, he is founder and
Speaker 2: CEO PJT Partners, So thank you so much for being here. Paul,
Speaker 2: give us a sense of where we are. I mean,
Speaker 2: you had some record years of emerging acquisitions and then
Speaker 2: it really fell off a cliff a little bit.
Speaker 5: How far back are we look?
Speaker 3: I think you need to look at this as pre
Speaker 3: COVID and post COVID because the disruptions of the COVID
Speaker 3: period extraordinary, And the reality is almost every market is
Speaker 3: healing and is reaching higher highs other than the M
Speaker 3: and A market. So we're seeing investment grade debt issuance
Speaker 3: record levels, spreads as low as have ever been in
Speaker 3: a similar vein on the equity side, equity issuance now
Speaker 3: is ahead of where it was pre COVID. So all
Speaker 3: of the necessary conditions are in place, and notwithstanding all
Speaker 3: of the desire to transact and to get ahead of
Speaker 3: a changing economy, M and A volumes continue to be.
Speaker 7: Soft.
Speaker 2: So explore the other than part of that. Why is
Speaker 2: it other than Why is M and A lagging behind
Speaker 2: the other markets? Well?
Speaker 7: I think it's a couple of things.
Speaker 3: One is, the current view on anti trust is clearly
Speaker 3: having a chilling effect on some deals. So we see
Speaker 3: many deals being contested. You're seeing the FTC and the
Speaker 3: DOJ being very vigilant in their anti trust enforcement, lots
Speaker 3: of second requests, elongated periods between announcements and closings, and
Speaker 3: it's not just those deals that get reviewed. There's a
Speaker 3: self editing process, and we're seeing a lot of deals
Speaker 3: that are debated vigorously in boardrooms. They never see the
Speaker 3: light of day because companies are uncomfortable putting themselves through
Speaker 3: that extended review process.
Speaker 7: That is one of the big issues.
Speaker 3: And I think the second one is private equity, which
Speaker 3: is such an engine of M and A activity. They've
Speaker 3: not been on the front legs the way they were historically,
Speaker 3: and I think a lot of that has to do
Speaker 3: with interest rates.
Speaker 2: On the first issue about regulation, do boards ever get
Speaker 2: sort of used to it, as it were, because although
Speaker 2: there is a lot of challenges, not too many have
Speaker 2: been successful, as I recall, so at some point they say, okay, yeah,
Speaker 2: they'll challenge, but in fact we'll get it through.
Speaker 3: The batting average of the government has not been very high.
Speaker 3: But what it has done is it's sent a signal
Speaker 3: that for many deals, even if there's no underlying reason
Speaker 3: why the transaction should not be approved, you're going to
Speaker 3: end up with an extended review process and review processes
Speaker 3: that get elongated, they bring risk. And the more risk
Speaker 3: there is, question becomes how does the business perform during
Speaker 3: what could be of twelve to fifteen even eighteen months
Speaker 3: between signing and closing. That's a lot of risk that
Speaker 3: a buyer is underwriting, and I think there are a
Speaker 3: lot of boards that are uncomfortable with that. Now, to
Speaker 3: your point, do we ever get past it? I think
Speaker 3: once we get past this election and we either have
Speaker 3: a change in administration and a change in antitrust policy,
Speaker 3: or there's a sense that the here and now is
Speaker 3: going to stay for another four years, I think either
Speaker 3: one of those is likely to be a significant catalyst
Speaker 3: on those deals that have yet to be brought to
Speaker 3: the marketplace.
Speaker 2: And what about the other item that you mentioned, actually,
Speaker 2: and that is a question of the P and E.
Speaker 2: We're here from a lot of limited partners right now.
Speaker 2: They're a little impatient about getting some of their capital
Speaker 2: back from the general partners. Are there vehicles that get
Speaker 2: around that that you might be involved in.
Speaker 3: Well, if there definitely are vehicles, but let's just kind
Speaker 3: of unpack it. What the problem is if you have
Speaker 3: private equity firms who have bought assets in a low
Speaker 3: interest rate environment and now all of a sudden, rates
Speaker 3: are meaningfully higher. There is a reluctance to monetize or
Speaker 3: to sell those assets in a period where they underwrote
Speaker 3: it at one multiple and now they're looking at selling
Speaker 3: it at a different multiple. And one of the great
Speaker 3: things about private equity firms is they are exquisite in
Speaker 3: controlling the exits. And what we're seeing is with a
Speaker 3: sense that while rates have crested, they have yet to
Speaker 3: come down. It's not going to be until rates start
Speaker 3: to come down. We believe that you're going to see
Speaker 3: a lot of monetizations from the private equity industry, and
Speaker 3: since there haven't been a lot of monetizations, they have
Speaker 3: been reluctant to continue to call capital from their limited partners.
Speaker 3: And in fact, I think we are at an extended
Speaker 3: period of time where the capital calls to investors in
Speaker 3: private equity funds continues to exceed the capital returned, and
Speaker 3: that's putting pressure on the deployment of capital. So private
Speaker 3: equity is less aggressive and deploying capital, and they've been
Speaker 3: less willing to monetize their own assets. And we're trying
Speaker 3: to work with private equity firms to deal with those
Speaker 3: liquidity issues.
Speaker 2: Out of Milkin and Los Angeles last week we heard
Speaker 2: a lot about continuation vehicles. Explain exactly what those are,
Speaker 2: how they work, and how they might release some of
Speaker 2: the pressure. Perhaps.
Speaker 3: So the whole idea of a continuation fund starts with
Speaker 3: the premise that when you find an asset that you
Speaker 3: like and you own it and you continue.
Speaker 7: To deliver superior results.
Speaker 3: This forced shot clock in monetizing it four five six
Speaker 3: years in just simply to give liquidity to investors, many
Speaker 3: of whom would be perfectly content if you just continued
Speaker 3: to own the asset and continue to get excess returns.
Speaker 3: But you do have other limited partners who have other
Speaker 3: needs for the capital want liquidity. So what a continuation
Speaker 3: vehicle does is it gives those limited partners who want
Speaker 3: liquidity the ability to leave or to exit the investment
Speaker 3: and let new funds, new pools of capital come in
Speaker 3: and the private equity firm continues to own and to
Speaker 3: manage the asset.
Speaker 2: So one of the things that has relieved in that
Speaker 2: past some of the pressure on private equity has been
Speaker 2: initial public offerings IPOs, which also have gone through a
Speaker 2: period a little more fallow. Where are we're in a
Speaker 2: the IPL market and could that give relief to some
Speaker 2: of these people.
Speaker 3: The answer is, of course it can, but it's easier
Speaker 3: said than done. So the IPO market is healthier today
Speaker 3: than it was a year ago. I think a year
Speaker 3: ago we were looking at pretty much a shut IPO market.
Speaker 3: We're getting back to levels pre COVID like, but not
Speaker 3: yet there. One of the issues is there's a disconnect
Speaker 3: between how the S and P five hundred companies are
Speaker 3: performing and the broader set of companies. So whether you're
Speaker 3: looking at the midcaps, small cap companies, the Russell, all
Speaker 3: of those indices have meaningfully underperformed the S and P
Speaker 3: and when you look at those companies, in fact, I
Speaker 3: think the Russell is down over the last three years
Speaker 3: in absolute dollars. So there's been a lot of reluctance
Speaker 3: to bring companies to market because those companies that are
Speaker 3: IPO candidates better resemble small and mid cap indosey companies
Speaker 3: than they do the S and P five hundred, and
Speaker 3: there's been this divergence. But there's been a number of
Speaker 3: IPOs that have successfully been launched in the marketplace. They've
Speaker 3: traded well in the aftermarket, and that should begin to
Speaker 3: create some additional liquidity for the private equity firms to
Speaker 3: return capital to LPs to enable them to be more
Speaker 3: front footed in deploying new capital. But what's happened is
Speaker 3: as the IPO market has been shut for an extended
Speaker 3: period of time, there are a lot of these planes
Speaker 3: that are circling up in the air that need to land,
Speaker 3: and the shadows supply of companies looking to IPO is
Speaker 3: probably more than the market can handle, So increasingly they're
Speaker 3: going to need to be other ways to create liquidity
Speaker 3: for these portfolio companies.
Speaker 2: So if you have a willing buyer, winning seller, you
Speaker 2: need to come up with the price. And obviously i've
Speaker 2: interest it's go up. That affects the valuation. I suspect
Speaker 2: that's part of the problem here. But is the problem
Speaker 2: the level of the interest rates or the uncertainty about
Speaker 2: where it's heading. Which is the more chilling effect in
Speaker 2: your business?
Speaker 3: I like to say that you know, you either bought
Speaker 3: things in a higher low interest rate environment and you're
Speaker 3: selling it in a higher low interest rate environment. And
Speaker 3: three of those four quadrants work just fine for deals.
Speaker 3: It's only when you bought things in a low interest
Speaker 3: rate environment and you're now selling them in a high
Speaker 3: interest rate environment, that you end up.
Speaker 7: With reluctant sellers. And right now, that's the environment we're in.
Speaker 3: And what's making it a bit more difficult is there
Speaker 3: is the prevailing wisdom that while rates are higher, they've
Speaker 3: crested and.
Speaker 7: Are likely to come down.
Speaker 3: Now, if ultimately rates stay at these elevated levels and
Speaker 3: they don't come down, then I think everyone's going to
Speaker 3: make their peace with the new paradigm and you're going
Speaker 3: to start to see more transactions. But as long as
Speaker 3: there's an anticipation the rates are coming down, I think
Speaker 3: you're going to see a lot of sellers withhold their
Speaker 3: inventory from the marketplace and you're going to see a
Speaker 3: more sluggish environment.
Speaker 2: You also need financing, and we've heard some of the
Speaker 2: banks pulling back somewhat because of regulatory other constraints. The
Speaker 2: same time, private credit we hear about every single day,
Speaker 2: is that providing the financing. Is there any shortage of
Speaker 2: financing right now?
Speaker 3: I think there's an abundance of capital. The issue is
Speaker 3: it's more costly capital. And when it's more costly capital,
Speaker 3: prices need to adjust to the fact that you need
Speaker 3: to take on a much higher interest burden. And it
Speaker 3: used to be that you could leverage yourself at four
Speaker 3: or five six times, and in a low interest rate environment,
Speaker 3: the interest coverage worked just fine. Now, all of a sudden,
Speaker 3: you do that math with rates meaningfully higher, and you
Speaker 3: need to put more equity into deals, which lowers returns.
Speaker 3: And the only way that works is you need lower prices.
Speaker 3: But there's an abundance of capital. Interestingly, money is flowing
Speaker 3: into credit funds from all all parts, and the reason
Speaker 3: for that is there's a general sense that over time
Speaker 3: rates are coming down and if you get in now
Speaker 3: and you could ride that rate travel down, you're going
Speaker 3: to end up making hefty profits on your credit.
Speaker 7: So credit is in demand.
Speaker 3: There isn't a lot of M and A right now,
Speaker 3: so there's relatively little supply of new inventory. Most of
Speaker 3: it is refinancings. Reds have collapsed. The issue is just
Speaker 3: the absolute rate is too high given the current environment.
Speaker 3: And I as I said before, one or two things
Speaker 3: are going to happen. Either rates are going to travel
Speaker 3: back down, in which case we'll get on stuck, or
Speaker 3: there's going to be a growing sense that this is
Speaker 3: the new normal, and folks will will make their peace with.
Speaker 2: Them as as it were.
Speaker 7: Yes, exactly the way to say.
Speaker 2: Paul Talbman will be staying with us as we turn
Speaker 2: to spin offs and whether we've seen the high watermark
Speaker 2: poor conglomerates. That's coming up next on Wall Street Week
Speaker 2: on Bloomberg. This is Wall Street Week. I'm David Weston
Speaker 2: and Paul Talban of PGAT Partners has stayed with us.
Speaker 2: SA Paul, let's talk about something you're very active, and
Speaker 2: that is some of the spinoff business, including Geve Vernovo
Speaker 2: one that we know something about. But you've been in
Speaker 2: quite a few of these. What's going on right now
Speaker 2: with these companies breaking up and spinning off.
Speaker 3: Look, the reality is that more focused company achieve better results.
Speaker 3: And the way you get focus is you shrink the
Speaker 3: mission and you're able to better allocate capital better and
Speaker 3: center employees have everyone feel as if what they're doing
Speaker 3: is the main event, that their mission critical and more
Speaker 3: focus does drive greater returns. And when you have these
Speaker 3: four flung conglomerates, which really is a throwback to a
Speaker 3: different era, this notion of diversification, you end up making
Speaker 3: inefficient capital allocations. The company tends not to benefit from
Speaker 3: the stars in the portfolio when those assets are in
Speaker 3: favor because there are other parts of the portfolio that
Speaker 3: are out of favor. You end up with a less
Speaker 3: competitive cost of capital, and then you've got shareholders who
Speaker 3: are frustrated, employees who are frustrated, boards who are frustrated,
Speaker 3: and increasingly there's a sense that let the shareholders, let
Speaker 3: them diversify, let them construct their own portfolio. But pure
Speaker 3: play are clearly in favor, and they command premium valuations.
Speaker 2: So the pure plays are in favor. Is it a
Speaker 2: fad or is it a permanent structural phenomenal because we
Speaker 2: had in the past times when we're going to put
Speaker 2: together these conglomerates as big as possible, then we broke
Speaker 2: them up. But it feels like it sort of goes
Speaker 2: back and forth and back and forth. Or are there
Speaker 2: structural factors that may be putting in one direction.
Speaker 3: Well, look, I would I would never underestimate Wall Street's
Speaker 3: ability to come full circle on any issue or any trend.
Speaker 3: So I hesitate to say we won't see those days again.
Speaker 3: I think what's different now is you have more vocal
Speaker 3: shareowners who are much more clear in their disdain for
Speaker 3: companies to just simply create diversification or size without purpose.
Speaker 3: And I think that probably is a governor that didn't
Speaker 3: exist a decade ago or two decades ago. So you've
Speaker 3: got much more in tune boards of directors, you have
Speaker 3: much more vocal shareowners than before. The one cautionary tale
Speaker 3: to that, David, is if you continue to have a
Speaker 3: FTC and a DOJ, that's going to block horizontal deals
Speaker 3: and they're going to prevent companies from getting bigger. I
Speaker 3: suspect that at some point companies are going to just
Speaker 3: it's a natural, a natural tendency to look at deals
Speaker 3: that can get regulatory approval. They may not be the
Speaker 3: right deals, but I can see if you're frustrated continuously
Speaker 3: trying to get deals done in your space and you're
Speaker 3: trying to grow your business, that you then look to
Speaker 3: diversifying transactions. But my hope is that companies remain focused
Speaker 3: on the mission.
Speaker 2: So start first with the efficient part of the capital markets.
Speaker 2: How much of this because the capital markets have become global,
Speaker 2: they become much more efficient, so the capital goes to
Speaker 2: where it belongs, if I can put it that way,
Speaker 2: much more quickly than they did back, for example, in
Speaker 2: the seventies or eighties. How much of that is driving
Speaker 2: some of this splitting up into more focused, perhaps smaller companies.
Speaker 3: Look, clearly, we're in a world that's speeding up, it's
Speaker 3: not slowing down, and companies need to have a currency
Speaker 3: that's competitive. And in many parts of the world you
Speaker 3: have companies who are listed outside the United States who
Speaker 3: enjoy a cost or theyn't enjoy they're burdened by a
Speaker 3: cost of capital disadvantage, and that's an issue. Then you
Speaker 3: have here in the United States and elsewhere conglomerates who
Speaker 3: are not getting credit for all of the assets that
Speaker 3: are all housed under one roof. And as they're competing
Speaker 3: for other assets against pure play companies with a higher
Speaker 3: flying currency, the trades that are hire multiple they're at
Speaker 3: a competitive disadvantage. So I think there's a necessity to
Speaker 3: making sure that you're always front footed. So what's different
Speaker 3: now from a generation to go is people are using
Speaker 3: their currency. Companies are using their currency. It's a competitive asset,
Speaker 3: and you need to make sure it doesn't become a liability.
Speaker 7: That's driving this.
Speaker 3: And the second is you have less patient capital today
Speaker 3: who's not willing to take comfort in the fact that
Speaker 3: while the stock doesn't trade well, the underlying assets are
Speaker 3: worth a lot. They want to see the underlying asset
Speaker 3: values reflected in the share price.
Speaker 2: Does it also redown to the shareholders benefit of potentially
Speaker 2: I remember talking to Larry C. Calp that you represented
Speaker 2: with the ge Ornovo's been a saying, look at some
Speaker 2: people want to really back healthcare, some people want to
Speaker 2: back energy, some people want to like aviation. And when
Speaker 2: we had them all together, you had to make a choice.
Speaker 2: Right now, you can go to one or the other,
Speaker 2: depending on which one you like. Is it actually more power?
Speaker 2: Does a lot of shareholders hand?
Speaker 3: It's all of those things right now. You know, shareowners
Speaker 3: can diversify themselves. If you own a healthcare stock and
Speaker 3: you want to be in airspace as well, you can
Speaker 3: buy another pure play company and create your own synthetic conglomerate.
Speaker 7: That's the first point.
Speaker 3: So all of this notion of diversification, which was part
Speaker 3: of you know, financial theory in the seventies and eighties
Speaker 3: and probably goes back to the sixties, that's been debunked,
Speaker 3: which is shareowners can create their own diversification. Second thing
Speaker 3: is when you're in very large organizations that do many things,
Speaker 3: oftentimes there's not a sense of purpose and an organizing
Speaker 3: principle for the employees and for the company to have
Speaker 3: a clear mission.
Speaker 7: That's different.
Speaker 3: So I think studies have shown that you get better
Speaker 3: operating performance. It's not just financial alchemy. You get better
Speaker 3: operating performance in a focused organization where what you do
Speaker 3: is mission critical. And I think GE is an incredible
Speaker 3: success story. Larry Colp and that team have done an
Speaker 3: extraordinary job. If you look at where they are today
Speaker 3: versus where they traded, stock is up I think five
Speaker 3: folds from the depths for GE, and the combined market
Speaker 3: capitalization of those three entities is approaching three hundred billion dollars.
Speaker 3: It's extraordinary what they've been able to do, but it
Speaker 3: starts with operating performance and then it translates into being
Speaker 3: able to get that value reflected in the public markets.
Speaker 2: You mentioned one of the potential impediments to sort of
Speaker 2: a more efficient allocation of capital is regulatory potentially, and
Speaker 2: you mentioned the FTC and Department of Justice, but they're
Speaker 2: not the only ones in the world. I mean European
Speaker 2: Common Market that EU has its own competion is what
Speaker 2: the UK does, China does, Japan does. So are those
Speaker 2: similarly potential impediments to what you need to get done.
Speaker 3: The complexity is multiplying, you know, it's a multiplicative complexity
Speaker 3: because these are global companies who have global customer bases.
Speaker 7: They operate almost everywhere in the world.
Speaker 3: The regulatory approvals they need need to come from the EU,
Speaker 3: the UK, China, the United States. You've got all sorts
Speaker 3: of different issues, protectionist issues, you've got trade wars, you've
Speaker 3: got a sense of what's national security issues. You've got
Speaker 3: the SAFIAT issues in the US, you've got consistent concerns elsewhere.
Speaker 3: And for global companies to be able to navigate all
Speaker 3: of that, even for those transactions that should be approved
Speaker 3: and ultimately are approved, it's just taking longer and that
Speaker 3: injects more risks. So it can be navigated, and you
Speaker 3: need to be thoughtful about it. And lots of deals
Speaker 3: get done and most deals that get announced do not
Speaker 3: get successfully challenged. The challenge, though, is you never know
Speaker 3: whether you're going to be in the crosshairs, whether you're
Speaker 3: the collateral damage, because the regulators aren't really looking at
Speaker 3: your transaction, they're trying to just send a signal that
Speaker 3: others in that industry should think twice before they bring
Speaker 3: transactions to the marketplace. And I think that's one of
Speaker 3: the ways in which we can explain why, in a
Speaker 3: world that's speeding up, where there's a great desire to
Speaker 3: constantly grow and develop one's company through acquisitions, divestitures, combinations,
Speaker 3: why we haven't seen it in the numbers.
Speaker 7: I think the.
Speaker 3: Regulatory oversight from a global perspective has clearly weighed on activity.
Speaker 2: Paul, it's really great, Javin wallstret Week, thank you so
Speaker 2: much for being here. That's Paul Tullban of PGAT Partners. Finally,
Speaker 2: one more thought. Artificial intelligence pioneer fafe A Lee says
Speaker 2: that AI is everywhere. It's not that big scary thing
Speaker 2: in the future. AI is here with us, And when
Speaker 2: she says it is here with us, she means with
Speaker 2: all of us, and in all sorts of different ways.
Speaker 2: Our special contributor Larry Summers says that it's not like
Speaker 2: the automation we've seen in the past, where machines took
Speaker 2: over manual chores. It's something much more.
Speaker 9: Most of the technological changes we've had before came for
Speaker 9: working people doing relatively routine things. I have a suspicion
Speaker 9: that AI is coming for the cognitive clash.
Speaker 2: Private equity juggernaut. Blackstone says it can use AI to
Speaker 2: sort through the wealth of data about past deals to
Speaker 2: figure out which future deals are most likely to work.
Speaker 1: Public market investing, which relies obviously on publicly available data,
Speaker 1: that sort of data will be increasingly and further commoditized
Speaker 1: in an AI world. And in contrast, the value you
Speaker 1: a proprietary data and insights that you can clean from
Speaker 1: a really large private market portfolio accumulator over many years
Speaker 1: across many businesses that will only be further enhanced.
Speaker 2: Besides building our portfolios, AI may end up building our
Speaker 2: ships for us as well.
Speaker 10: Now, I was listening to Jenson Wang speak at a
Speaker 10: conference the other day, and he showed how they can
Speaker 10: build a boat through AI, a very complicated supertiker, and
Speaker 10: then he said, we can build the factory that builds
Speaker 10: the voat, and then we'll build the robots that build
Speaker 10: the boat in the factory.
Speaker 5: And I'm like, where are the workers?
Speaker 2: What do we do? AI can enhance our medical care
Speaker 2: by cutting through some of what we go through. Now
Speaker 2: that doesn't help us get.
Speaker 11: Better effective in that hopefully we'll eliminate a lot of
Speaker 11: unnecessary testing, a lot of procedures or activities that don't
Speaker 11: directly link to the well being of the patient.
Speaker 2: AI may even provide companionship for us in our old age.
Speaker 2: The New York State Office for the Aging has already
Speaker 2: launched a pilot program giving some across the state AI
Speaker 2: robots free of charge. They tell corny jokes, they take
Speaker 2: seniors on virtual trips, and generally hang out with them
Speaker 2: when no one else is there. Those in the program
Speaker 2: are reporting a ninety five percent drop in loneliness. So
Speaker 2: I suppose it was inevitable that generative AI would enter
Speaker 2: our love lives as well. The founder of the online
Speaker 2: dating app Bumble last week described an AI dating concierge
Speaker 2: that could go out on dates with others AI avatars
Speaker 2: and scope things out, seeing whether the relationship is worth
Speaker 2: venturing out on an actual physical date with the real person.
Speaker 12: There is a world where your dating concierge could go
Speaker 12: and date for you with other dating concierge.
Speaker 5: No, no, truly, and then you.
Speaker 12: Don't have to talk to six hundred people and all
Speaker 12: of San Francisco for you say, these are the three
Speaker 12: people you really ought to meet.
Speaker 2: But why leave it there? Why not take it all
Speaker 2: the way and simply leave it up to our avatars
Speaker 2: to figure out the mysteries of courtship and mating and
Speaker 2: commitment and save us all all the trouble. Open AI
Speaker 2: gave us a taste of this and announcing it's all
Speaker 2: new Chack GPT four this week, complete with a voice
Speaker 2: that some have said sounds a lot like Scarlett Johansson
Speaker 2: playing the role of an AI operating system.
Speaker 12: In her I'm learning everything about everything, lovely look the world.
Speaker 2: But then again, you likely won't have to pay at
Speaker 2: alimony if things don't work out. That does it for
Speaker 2: this episode of Wall Street Week, I'm David Weston. See
Speaker 2: you next week.