1 00:00:02,920 --> 00:00:10,799 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,840 --> 00:00:15,040 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:15,040 --> 00:00:18,040 Speaker 1: Eastern on Affo, CarPlay and Android Auto with the Bloomberg 4 00:00:18,079 --> 00:00:21,400 Speaker 1: Business app. Listen on demand wherever you get your podcasts, 5 00:00:21,640 --> 00:00:23,360 Speaker 1: or watch us live on YouTube. 6 00:00:25,079 --> 00:00:27,520 Speaker 2: Let's go to that top story of the morning, and 7 00:00:27,560 --> 00:00:29,880 Speaker 2: that is Boeing. So that's doc up. But see, I 8 00:00:29,880 --> 00:00:32,320 Speaker 2: think we're just up by about one percent here as 9 00:00:32,360 --> 00:00:35,640 Speaker 2: David cal Hun will be stepping down as CEO, but 10 00:00:35,720 --> 00:00:37,600 Speaker 2: not until the end of the year. Apparently he's going 11 00:00:37,640 --> 00:00:39,720 Speaker 2: to be intimate and intimately I made that word up, 12 00:00:39,760 --> 00:00:41,839 Speaker 2: but he's going to be involved into a replacement, which 13 00:00:41,880 --> 00:00:44,479 Speaker 2: I also think is quite interesting. So I want to 14 00:00:44,520 --> 00:00:47,720 Speaker 2: go to George Ferguson. He's the guy. He's the airline 15 00:00:47,720 --> 00:00:49,680 Speaker 2: guy that you got to go to. He is senior aerospace, 16 00:00:49,720 --> 00:00:53,960 Speaker 2: defense and airlines analysts joining us now in Princeton. All right, George, 17 00:00:54,640 --> 00:00:56,680 Speaker 2: your reaction to the news that we saw earlier, and 18 00:00:56,680 --> 00:00:58,000 Speaker 2: then we'll walk up to what's next. 19 00:00:59,240 --> 00:01:02,640 Speaker 3: Yeah, So my action was, you know, I think we 20 00:01:02,640 --> 00:01:05,640 Speaker 3: we thought Dave Calhoun probably would be going I hate 21 00:01:05,680 --> 00:01:08,480 Speaker 3: to sort of wish that in anybody. But it seemed that, 22 00:01:08,640 --> 00:01:12,040 Speaker 3: you know, the problems in the manufacturing business just there 23 00:01:12,040 --> 00:01:13,880 Speaker 3: were just too many of them over too long a 24 00:01:13,920 --> 00:01:17,160 Speaker 3: period of time to say that he was as effectual, 25 00:01:17,240 --> 00:01:19,480 Speaker 3: if that's a right word, as he as he should 26 00:01:19,480 --> 00:01:23,080 Speaker 3: have been at bringing everything, you know, back into order. 27 00:01:23,800 --> 00:01:25,480 Speaker 3: It does seem weird that it's going to take them 28 00:01:25,480 --> 00:01:29,040 Speaker 3: till the end of twenty twenty four define his replacement. 29 00:01:29,040 --> 00:01:30,960 Speaker 3: There's a lot of things that have to happen between 30 00:01:31,080 --> 00:01:33,920 Speaker 3: now and then that the company just can't wait for. 31 00:01:34,400 --> 00:01:38,080 Speaker 3: Things like the purchase of Spirit Aerosystems, which should improve 32 00:01:38,120 --> 00:01:41,440 Speaker 3: reporting lines should have been improved, the stability of the 33 00:01:41,520 --> 00:01:45,160 Speaker 3: you know, the production process, uh, and the quality process. 34 00:01:45,280 --> 00:01:46,479 Speaker 4: That's super important. 35 00:01:46,880 --> 00:01:50,400 Speaker 3: They've got the they've got to you know, serve to 36 00:01:50,440 --> 00:01:53,240 Speaker 3: the FAA their view and how they're gonna they're gonna 37 00:01:53,320 --> 00:01:57,560 Speaker 3: stabilize their production process. That that's coming due here too. 38 00:01:58,760 --> 00:02:00,640 Speaker 3: And at the same time, right they've got to start 39 00:02:00,680 --> 00:02:04,480 Speaker 3: to increase build rates so they can improve profits and 40 00:02:04,520 --> 00:02:05,040 Speaker 3: cash flow. 41 00:02:05,120 --> 00:02:06,640 Speaker 4: They can't wait a year on that either. 42 00:02:07,000 --> 00:02:08,920 Speaker 3: So there's a lot of super important things that are 43 00:02:08,919 --> 00:02:11,359 Speaker 3: happening this year to wait till the end of the 44 00:02:11,440 --> 00:02:13,840 Speaker 3: year to replace the CEO that doesn't seem to have 45 00:02:14,280 --> 00:02:17,680 Speaker 3: been able to get that job done well. It seems 46 00:02:17,680 --> 00:02:19,720 Speaker 3: like a lengthy timeline to me, But it may just 47 00:02:19,800 --> 00:02:23,000 Speaker 3: be that the board was flat footed and realizing that 48 00:02:23,040 --> 00:02:26,600 Speaker 3: the CEO had to go and as nowhere in a 49 00:02:26,680 --> 00:02:29,160 Speaker 3: search and so they've got to start from scratch here 50 00:02:29,200 --> 00:02:30,520 Speaker 3: and figure out who the next person is. 51 00:02:30,840 --> 00:02:32,760 Speaker 5: What can you tell us about Stephanie Pope, She's gonna 52 00:02:32,760 --> 00:02:35,280 Speaker 5: be stepping up and taking a big role with the 53 00:02:35,800 --> 00:02:37,360 Speaker 5: aircraft business. 54 00:02:38,160 --> 00:02:40,079 Speaker 3: Yeah, so she's been around for a while and she's 55 00:02:40,120 --> 00:02:45,400 Speaker 3: been CFO of that aircraft business. So it seems like 56 00:02:45,440 --> 00:02:50,160 Speaker 3: a logical inside choice. You know, it may not be 57 00:02:50,240 --> 00:02:54,320 Speaker 3: the final choice there, although it may well be. But 58 00:02:54,400 --> 00:02:56,799 Speaker 3: I think when you have a you know, a head 59 00:02:56,800 --> 00:03:00,200 Speaker 3: of that department, stand deal who's leaving after thirty us 60 00:03:00,240 --> 00:03:04,480 Speaker 3: heres at the company, they're hard shoes to fill, and 61 00:03:04,520 --> 00:03:06,720 Speaker 3: then you know, you look around internally for who could 62 00:03:06,720 --> 00:03:09,320 Speaker 3: be the next person. The CFO is always in particularly 63 00:03:09,320 --> 00:03:11,919 Speaker 3: decent shape because they understand at least all the financials 64 00:03:12,639 --> 00:03:16,200 Speaker 3: about the business. She's also had, you know, had positions 65 00:03:16,200 --> 00:03:20,040 Speaker 3: at blowing Boeing Global Services, which is a super successful 66 00:03:20,080 --> 00:03:23,800 Speaker 3: business inside Boeing High teens margins. To me, the only 67 00:03:23,800 --> 00:03:26,560 Speaker 3: thing I don't see in her background is that manufacturing 68 00:03:26,639 --> 00:03:29,400 Speaker 3: skill set. I think the next CEO and the next 69 00:03:29,400 --> 00:03:32,160 Speaker 3: head of Boeing Commercial Airplanes has to really have a 70 00:03:32,320 --> 00:03:37,720 Speaker 3: manufacturing engineering mindset background, and I think that's that's what 71 00:03:37,880 --> 00:03:38,920 Speaker 3: I don't quite see. 72 00:03:38,680 --> 00:03:41,760 Speaker 2: There, sort of like Larry culp. 73 00:03:42,800 --> 00:03:45,880 Speaker 3: No, I mean, Lowry obviously is pretty busy, and honestly, 74 00:03:46,280 --> 00:03:51,680 Speaker 3: the job he has now a GE could be better, better, profits, 75 00:03:51,680 --> 00:03:54,760 Speaker 3: more fun than Boeing because there's a lot of great 76 00:03:54,800 --> 00:03:58,000 Speaker 3: technology inside GE and there's a huge bow wave of 77 00:03:58,040 --> 00:04:00,360 Speaker 3: a lot of maintenance coming that's really high mind margin. 78 00:04:00,840 --> 00:04:02,360 Speaker 4: I think you'd really have to work hard. 79 00:04:02,200 --> 00:04:04,200 Speaker 2: To get like But George, I mean, does he like 80 00:04:04,240 --> 00:04:05,720 Speaker 2: fun or does he like a challenge? I mean he 81 00:04:05,760 --> 00:04:07,080 Speaker 2: was the one that went did GE to begin. 82 00:04:06,920 --> 00:04:11,160 Speaker 4: With, Sorry you were you broke up a little bit there. 83 00:04:11,120 --> 00:04:13,200 Speaker 2: Said Oh, it's saying that does he like fun or 84 00:04:13,200 --> 00:04:15,200 Speaker 2: does he like a challenge because he was the one 85 00:04:15,240 --> 00:04:17,360 Speaker 2: that went to GE in the first place when it 86 00:04:17,480 --> 00:04:18,200 Speaker 2: was a hot mess. 87 00:04:18,720 --> 00:04:20,680 Speaker 3: I do think he likes a challenge, and I think 88 00:04:20,720 --> 00:04:23,200 Speaker 3: he showed his ability to navigate it really. 89 00:04:22,920 --> 00:04:23,839 Speaker 4: Well at GE. 90 00:04:24,080 --> 00:04:26,159 Speaker 3: But again, you know they're just kind of getting to 91 00:04:26,200 --> 00:04:30,400 Speaker 3: the super fun part. I think there's still challenge inside 92 00:04:30,440 --> 00:04:32,680 Speaker 3: ge but he's just getting to the point where he's 93 00:04:32,720 --> 00:04:34,960 Speaker 3: got aerospace broken out and he can really make a 94 00:04:34,960 --> 00:04:38,600 Speaker 3: lot of hay here. So I don't someone like him 95 00:04:38,680 --> 00:04:42,040 Speaker 3: is absolutely what I think Boeing needs. I don't know, 96 00:04:42,040 --> 00:04:43,960 Speaker 3: maybe he's got a you know, maybe there's a protege 97 00:04:44,120 --> 00:04:46,520 Speaker 3: somewhere inside there that they could tap or something. 98 00:04:47,040 --> 00:04:50,680 Speaker 5: So thinking about who could be the next CEO, here 99 00:04:51,320 --> 00:04:54,200 Speaker 5: is the expectation, George, that it'll come from an external 100 00:04:54,200 --> 00:04:58,120 Speaker 5: candidate or or internally And are there any early front runners? 101 00:04:58,160 --> 00:04:58,480 Speaker 5: Do you think? 102 00:04:59,040 --> 00:04:59,280 Speaker 4: Yeah? 103 00:04:59,320 --> 00:05:01,760 Speaker 3: So, I definitely think it's going to come external, right. 104 00:05:01,800 --> 00:05:04,080 Speaker 3: I just think the fact that you've seen this purge 105 00:05:04,080 --> 00:05:06,920 Speaker 3: of the of the CEO, you see the purge of 106 00:05:07,080 --> 00:05:11,279 Speaker 3: commercial airplane president, means that we've depleted some you know, 107 00:05:11,320 --> 00:05:14,760 Speaker 3: we've depleted some talent there you look, you know, there 108 00:05:14,800 --> 00:05:19,160 Speaker 3: there was you know, former heads of Boeing's commercial airplanes 109 00:05:20,160 --> 00:05:23,320 Speaker 3: that had left, you know when when Muhlenberg came on, 110 00:05:24,200 --> 00:05:27,000 Speaker 3: they could potentially be, you know, in the running for 111 00:05:27,040 --> 00:05:29,440 Speaker 3: something like this. I know a couple of them wanted 112 00:05:29,480 --> 00:05:32,279 Speaker 3: the CEO job and didn't get it, but I'm almost 113 00:05:32,279 --> 00:05:34,680 Speaker 3: positive you're talking about something that's going to be outside. 114 00:05:34,720 --> 00:05:36,800 Speaker 3: It's Ray Connor is the name that comes to mind. 115 00:05:36,880 --> 00:05:39,680 Speaker 3: Used to be the head of Boeing Commercial. I'm not 116 00:05:39,720 --> 00:05:41,719 Speaker 3: sure what he's doing now, but he might be on 117 00:05:41,760 --> 00:05:42,640 Speaker 3: the list similar. 118 00:05:43,960 --> 00:05:46,640 Speaker 2: What's the culture like at a Boeing in terms of 119 00:05:46,680 --> 00:05:47,640 Speaker 2: getting an outsider? 120 00:05:49,600 --> 00:05:51,640 Speaker 4: You know, I think Boeing is one of those companies. 121 00:05:51,680 --> 00:05:53,640 Speaker 3: I think you get a job and you stick around 122 00:05:53,680 --> 00:05:57,400 Speaker 3: for lots and lots of years, and so, you know, 123 00:05:57,600 --> 00:06:01,960 Speaker 3: I think that bringing people in from outside is something 124 00:06:02,000 --> 00:06:04,800 Speaker 3: you do only when you have a breakdown like you've 125 00:06:04,839 --> 00:06:08,599 Speaker 3: had now. Right under normal circumstances, there would be very 126 00:06:09,080 --> 00:06:12,719 Speaker 3: clean lines of succession inside Boeing. You know, you would 127 00:06:12,760 --> 00:06:15,440 Speaker 3: move up through the ranks and expect opportunities as you 128 00:06:15,760 --> 00:06:18,440 Speaker 3: as you rose. But there's been so much tumult in 129 00:06:18,480 --> 00:06:21,120 Speaker 3: this business over the last I don't know, you know, 130 00:06:21,240 --> 00:06:24,279 Speaker 3: four years or so, that I think that it's a 131 00:06:24,320 --> 00:06:26,200 Speaker 3: time in their history where they're going they're going to 132 00:06:26,240 --> 00:06:29,320 Speaker 3: be going outside a lot more to replenish some of 133 00:06:29,560 --> 00:06:32,400 Speaker 3: some of these senior management ranks that they've just they've turned. 134 00:06:32,200 --> 00:06:34,400 Speaker 5: Over a bunch of it and George it seems like 135 00:06:35,600 --> 00:06:38,280 Speaker 5: this is no quick fix here. It seems like it 136 00:06:38,360 --> 00:06:41,599 Speaker 5: was years, maybe even decades in the making in terms 137 00:06:41,640 --> 00:06:45,240 Speaker 5: of maybe the deterioration of some of their quality controls. 138 00:06:45,279 --> 00:06:48,559 Speaker 5: Here when you talk to in an industry folks, people 139 00:06:48,600 --> 00:06:51,920 Speaker 5: at Boeing, is there a pathway to kind of get 140 00:06:51,920 --> 00:06:53,440 Speaker 5: back to where they were in terms of quality? 141 00:06:55,000 --> 00:06:56,880 Speaker 3: I think there is, But it's a lot of attention 142 00:06:56,960 --> 00:06:59,320 Speaker 3: to detail. And like you said, it's slow work, so 143 00:07:00,080 --> 00:07:02,200 Speaker 3: you can't you can't sort of wave a wand I 144 00:07:02,240 --> 00:07:06,719 Speaker 3: think and make it, you know, happen overnight. Really, you know, 145 00:07:06,920 --> 00:07:10,440 Speaker 3: I think has a lot to do with people and processes, right, 146 00:07:10,480 --> 00:07:12,720 Speaker 3: And that's why I think you want someone like a 147 00:07:12,800 --> 00:07:16,560 Speaker 3: Larry Koppe who loves people and processes. You need and 148 00:07:16,760 --> 00:07:18,679 Speaker 3: I mean that just takes time. You need a lot more. 149 00:07:19,080 --> 00:07:22,040 Speaker 3: You need training, you need, you need you know in 150 00:07:22,080 --> 00:07:24,080 Speaker 3: the interm you probably need to beef up some of 151 00:07:24,120 --> 00:07:27,360 Speaker 3: the oversight. You need to get into your supply chain. 152 00:07:27,400 --> 00:07:28,720 Speaker 3: You need to give them a hug, you need to 153 00:07:28,760 --> 00:07:31,920 Speaker 3: help them out, you know, help them bring you quality products. 154 00:07:31,960 --> 00:07:34,360 Speaker 3: I mean, it's not a it's not a hey, how 155 00:07:34,400 --> 00:07:36,760 Speaker 3: are you going to make my margins work better? In 156 00:07:36,800 --> 00:07:40,040 Speaker 3: the next couple of years discussion. Right, it's really like 157 00:07:40,080 --> 00:07:42,840 Speaker 3: I said, it's people and processes. It's a softer side 158 00:07:43,320 --> 00:07:46,280 Speaker 3: of management. I think Boeing over the last decade or 159 00:07:46,280 --> 00:07:49,920 Speaker 3: two really was more into the how do I squeeze 160 00:07:49,960 --> 00:07:52,360 Speaker 3: you to get you know, you to give me products 161 00:07:52,360 --> 00:07:55,720 Speaker 3: at a cheaper price so I can build my margins. 162 00:07:54,920 --> 00:08:00,400 Speaker 3: There's a you know, it's what is its recipe for success? 163 00:08:00,400 --> 00:08:03,040 Speaker 3: It wasn't that wasn't quite the term, but there was 164 00:08:03,080 --> 00:08:06,520 Speaker 3: a term like that that Boeing was using with their suppliers. 165 00:08:06,600 --> 00:08:08,720 Speaker 3: It was all about squeezing them. So the supply chain 166 00:08:08,800 --> 00:08:12,000 Speaker 3: is all you know, they've been scarred, they're you know, 167 00:08:12,040 --> 00:08:14,760 Speaker 3: they're they're they're worried about when Boeing comes to talk 168 00:08:14,800 --> 00:08:15,920 Speaker 3: to them. And I think they need to get to 169 00:08:15,960 --> 00:08:18,560 Speaker 3: a world where when Boeing shows up that they think 170 00:08:18,600 --> 00:08:20,240 Speaker 3: someone's there to help them and is looking out for 171 00:08:20,280 --> 00:08:22,400 Speaker 3: their best interests partnering for success. 172 00:08:22,400 --> 00:08:24,520 Speaker 2: Sorry, I love that idea though. It's like you just 173 00:08:24,560 --> 00:08:26,920 Speaker 2: need a hug and be like we got this guys, 174 00:08:27,480 --> 00:08:29,480 Speaker 2: versus like squeezing out of the suppliers. It's just like 175 00:08:29,520 --> 00:08:34,520 Speaker 2: a great visual for a manufacturing giant like Boeing George 176 00:08:34,520 --> 00:08:37,360 Speaker 2: Ferguson joining us. He is Bloomberg Intelligence is senior Aerospace, 177 00:08:37,400 --> 00:08:41,440 Speaker 2: Defense and airline analyst. I think that's gonna be so interesting, Like, 178 00:08:41,440 --> 00:08:43,199 Speaker 2: how do you even start a search like this? 179 00:08:43,559 --> 00:08:46,360 Speaker 5: Yeah, you know, I guess, as George was suggesting, you know, 180 00:08:46,360 --> 00:08:51,079 Speaker 5: a couple of attributes. You need engineering expertise and manufacturing expertise. 181 00:08:51,120 --> 00:08:53,360 Speaker 5: This is not a marketing story, you know, it doesn't 182 00:08:53,440 --> 00:08:56,160 Speaker 5: feel like it's a strategy story that you go to 183 00:08:56,200 --> 00:08:58,880 Speaker 5: like a consultant or something. It's just nuts and bolts 184 00:08:59,040 --> 00:09:01,400 Speaker 5: manufacturing at the as George has told us in the past, 185 00:09:01,800 --> 00:09:05,400 Speaker 5: at the highest tolerance levels you can ever imagine, making 186 00:09:05,440 --> 00:09:07,439 Speaker 5: an airplane's a little bit different than making an automobile 187 00:09:08,120 --> 00:09:10,760 Speaker 5: in terms of tolerances and things like that. So I 188 00:09:10,800 --> 00:09:13,880 Speaker 5: would guess that there's relatively a small pool of people 189 00:09:14,280 --> 00:09:16,000 Speaker 5: that kind of that kind of fifill that. 190 00:09:16,120 --> 00:09:18,040 Speaker 2: So I wonder where the timing is for that, Like 191 00:09:18,120 --> 00:09:20,000 Speaker 2: knowing that there's a small pool of people, Like why 192 00:09:20,080 --> 00:09:22,520 Speaker 2: do this write like today but then wait for the 193 00:09:22,520 --> 00:09:23,079 Speaker 2: rest of the year. 194 00:09:23,160 --> 00:09:25,120 Speaker 5: I don't just get I think this it just feels 195 00:09:25,160 --> 00:09:27,240 Speaker 5: like this was tied into the news we got Friday 196 00:09:27,280 --> 00:09:29,280 Speaker 5: about oh, the certain members of the board are going 197 00:09:29,280 --> 00:09:31,200 Speaker 5: to go on a listening tour with our big clients 198 00:09:31,920 --> 00:09:34,480 Speaker 5: without the CEO. I think that it feels to me, 199 00:09:34,520 --> 00:09:36,480 Speaker 5: at least some of these big airlines said, you know what, 200 00:09:36,480 --> 00:09:38,240 Speaker 5: you need to make a change there at the top, 201 00:09:38,400 --> 00:09:40,600 Speaker 5: and you need to see that started now. And I 202 00:09:40,600 --> 00:09:42,600 Speaker 5: think they probably just kind of stooed on that over 203 00:09:42,640 --> 00:09:45,320 Speaker 5: the weekend, and this is the decision we come up, 204 00:09:45,320 --> 00:09:46,280 Speaker 5: so we'll stay on top of that. 205 00:09:47,800 --> 00:09:51,679 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 206 00:09:51,760 --> 00:09:55,240 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 207 00:09:55,320 --> 00:09:58,079 Speaker 1: Auto with the Bloomberg Business app. You can also listen 208 00:09:58,200 --> 00:10:01,280 Speaker 1: live on Amazon Alexa from our flagship New York station. 209 00:10:01,640 --> 00:10:04,719 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 210 00:10:06,080 --> 00:10:08,839 Speaker 5: Alex. I'm seeing a red headline cross to Bloomberg turmoil here. 211 00:10:09,000 --> 00:10:12,280 Speaker 5: Trump bond reduced to one hundred and seventy five million 212 00:10:12,360 --> 00:10:15,000 Speaker 5: dollars in New York fraud case. So I guess that's 213 00:10:15,040 --> 00:10:17,439 Speaker 5: a piece of good news for the former President's a 214 00:10:17,480 --> 00:10:19,200 Speaker 5: lot better than the four hundred and fifty four million 215 00:10:19,240 --> 00:10:19,480 Speaker 5: he was. 216 00:10:19,440 --> 00:10:21,160 Speaker 2: There and then it was one hundred and twenty percent 217 00:10:21,559 --> 00:10:23,640 Speaker 2: to post. It was even more than that. He has 218 00:10:23,679 --> 00:10:27,560 Speaker 2: said last week that President Trump has almost I'm quoting 219 00:10:27,920 --> 00:10:30,800 Speaker 2: five hundred million dollars in cash, and that he will 220 00:10:30,840 --> 00:10:33,760 Speaker 2: use a substantial amount of that to fund his campaign 221 00:10:34,120 --> 00:10:37,240 Speaker 2: to return to the White House. In a court Finally, 222 00:10:37,360 --> 00:10:40,120 Speaker 2: he did claim that he'd need closer to one billion 223 00:10:40,160 --> 00:10:42,360 Speaker 2: dollars in reserves to cover the bond and still have 224 00:10:42,480 --> 00:10:45,240 Speaker 2: enough cash on hand to run his sprawling real estate company. 225 00:10:45,600 --> 00:10:48,040 Speaker 2: So I mean anything at that point three hundred million 226 00:10:48,040 --> 00:10:53,040 Speaker 2: dollar reduction potentially helping him as well. Trump has said 227 00:10:53,080 --> 00:10:56,360 Speaker 2: that the cash crunch had emerged after thirty insurance companies 228 00:10:56,360 --> 00:10:58,560 Speaker 2: that arranged such bonds refused to take any of his 229 00:10:58,679 --> 00:11:02,440 Speaker 2: properties as collateral. So the latest headline is that his 230 00:11:02,920 --> 00:11:05,959 Speaker 2: bond reduced payment for President Trump now to one hundred 231 00:11:06,000 --> 00:11:09,079 Speaker 2: and seventy five million dollars in that New York fraud case. 232 00:11:09,120 --> 00:11:12,080 Speaker 2: Remember the overall penalty was one hundred and fifty four million, 233 00:11:12,280 --> 00:11:14,679 Speaker 2: and you usually have to pay more for that bond. 234 00:11:14,800 --> 00:11:17,720 Speaker 5: Yeah, So the question is does he have the cash 235 00:11:17,760 --> 00:11:20,080 Speaker 5: with you know where wherewithal to make that one hundred 236 00:11:20,080 --> 00:11:22,360 Speaker 5: and seventy five million dollars satisfy that seventy five hundred 237 00:11:22,360 --> 00:11:25,240 Speaker 5: million bond. I guess that's the next question. But that's 238 00:11:25,240 --> 00:11:27,760 Speaker 5: something I think they would have to be answered again today, right. 239 00:11:28,080 --> 00:11:30,319 Speaker 2: I have no idea. This is this is why I'm 240 00:11:30,320 --> 00:11:33,480 Speaker 2: not a lawyer. And also I just pointed, but he's 241 00:11:33,480 --> 00:11:36,120 Speaker 2: also a sitting for one of his criminal cases too. 242 00:11:36,400 --> 00:11:39,720 Speaker 5: Yes, the I guess. I see some video shots of 243 00:11:39,760 --> 00:11:42,600 Speaker 5: the courthouse in Manhattan. I guess this on the hush 244 00:11:42,640 --> 00:11:46,839 Speaker 5: money payments. Apparently that is also going on today down there. 245 00:11:46,880 --> 00:11:48,800 Speaker 5: So again, so I guess I think on the margin, 246 00:11:49,040 --> 00:11:51,880 Speaker 5: a piece of good news for the former president his 247 00:11:51,960 --> 00:11:54,040 Speaker 5: bond reduced to one hundred and seventy five million dollars 248 00:11:54,120 --> 00:11:56,680 Speaker 5: in the New York fraud case. So again, I guess 249 00:11:56,760 --> 00:11:59,679 Speaker 5: the next steps will be just how do they How 250 00:11:59,679 --> 00:12:02,200 Speaker 5: does former President Trump and his team, how do they 251 00:12:02,240 --> 00:12:04,040 Speaker 5: satisfy that that bond? 252 00:12:04,320 --> 00:12:06,679 Speaker 2: Do they keep fighting it? Or I think he's ten 253 00:12:06,760 --> 00:12:09,200 Speaker 2: days right to deliver that money? So is there anything 254 00:12:09,240 --> 00:12:09,720 Speaker 2: that's needful? 255 00:12:09,720 --> 00:12:11,760 Speaker 5: Well, something was due today, I thought today was on 256 00:12:11,840 --> 00:12:14,199 Speaker 5: the former bond. Maybe this is a new bond or something. 257 00:12:14,240 --> 00:12:16,160 Speaker 2: Well, this is that President Trump must pay that one 258 00:12:16,200 --> 00:12:18,880 Speaker 2: hundred and seventy five million dollars bond within ten days. Yes, 259 00:12:19,440 --> 00:12:21,120 Speaker 2: that's the court, So it gives him some time, I 260 00:12:21,120 --> 00:12:22,640 Speaker 2: think to get it together. So I wonder like where 261 00:12:22,720 --> 00:12:26,040 Speaker 2: that comes from, yep, and how that winds up coming 262 00:12:26,080 --> 00:12:29,600 Speaker 2: from there? You're joining us now. As Eric Clarson, Bloomberg 263 00:12:29,720 --> 00:12:33,559 Speaker 2: Legal reporter, I saw him, he literally ran from his desk, 264 00:12:33,640 --> 00:12:35,400 Speaker 2: So don't mind if he's a little out of breath. 265 00:12:36,120 --> 00:12:38,319 Speaker 2: Were you expecting or reduced bond here? 266 00:12:39,480 --> 00:12:41,240 Speaker 6: You know, I would have thought that if they were 267 00:12:41,240 --> 00:12:43,000 Speaker 6: going to reduce it, they would have put it at 268 00:12:43,040 --> 00:12:46,440 Speaker 6: the one hundred million dollar request that Trump had made, 269 00:12:46,480 --> 00:12:49,120 Speaker 6: because he had said that that was the maximum he 270 00:12:49,200 --> 00:12:52,120 Speaker 6: was able to actually arrange. So it'll be interesting to 271 00:12:52,160 --> 00:12:54,320 Speaker 6: see if Trump says that he can go ahead and 272 00:12:55,080 --> 00:12:56,280 Speaker 6: do this a larger one. 273 00:12:57,040 --> 00:12:59,840 Speaker 5: So but if nothing else, it buys him another ten days. 274 00:13:00,080 --> 00:13:01,800 Speaker 5: Are we reading that correctly? That he had had to 275 00:13:01,840 --> 00:13:05,720 Speaker 5: satisfy that foreurner fifty four million dollars bond today, But 276 00:13:05,840 --> 00:13:07,840 Speaker 5: now with this reduction, it kind of starts to clock again. 277 00:13:07,960 --> 00:13:09,520 Speaker 4: Is that exactly? 278 00:13:09,559 --> 00:13:12,439 Speaker 6: So that definitely, for now the New York Attorney General 279 00:13:12,840 --> 00:13:15,079 Speaker 6: won't be trying to seize his assets, which was the 280 00:13:15,120 --> 00:13:16,360 Speaker 6: big fear of starting today. 281 00:13:17,920 --> 00:13:20,520 Speaker 2: So can you just wrap this in? So what was 282 00:13:20,559 --> 00:13:22,520 Speaker 2: the argument, like how did they arrive at that one 283 00:13:22,640 --> 00:13:25,480 Speaker 2: seventy five from the four fifty four, Like, what is 284 00:13:25,480 --> 00:13:28,520 Speaker 2: a conversation around that? And is that the normal conversation 285 00:13:28,559 --> 00:13:30,920 Speaker 2: we would hear from anybody who was going and trying 286 00:13:30,920 --> 00:13:32,440 Speaker 2: to get the fine reduced. 287 00:13:32,840 --> 00:13:35,400 Speaker 6: Well, it's a pretty unusual situation to begin with, just 288 00:13:35,400 --> 00:13:39,520 Speaker 6: because normally, with damage awards of this big and bonds 289 00:13:39,559 --> 00:13:42,520 Speaker 6: this big, they involve like really big fortune five hundred 290 00:13:42,520 --> 00:13:45,400 Speaker 6: companies or things like that. And as Trump's lawyers argued, 291 00:13:45,400 --> 00:13:49,000 Speaker 6: you know, for a privately held company, the Trump organization 292 00:13:49,120 --> 00:13:51,080 Speaker 6: is huge, but not you know, as massive as some 293 00:13:51,120 --> 00:13:54,199 Speaker 6: big corporations. That it was just really difficult for them 294 00:13:54,240 --> 00:13:56,400 Speaker 6: to arrange a bond of this size. So it's all 295 00:13:56,520 --> 00:14:00,480 Speaker 6: kind of novel. It's an unusual situation all around. I 296 00:14:00,559 --> 00:14:02,720 Speaker 6: haven't had a chance to read the whole decision yet, 297 00:14:02,720 --> 00:14:05,040 Speaker 6: but I think the appeals court just decided to have 298 00:14:05,080 --> 00:14:07,640 Speaker 6: a little bit of mercy on him while still putting 299 00:14:07,679 --> 00:14:10,120 Speaker 6: him under some pressure to arrange a bigger bond than 300 00:14:10,200 --> 00:14:11,360 Speaker 6: he says he was able to. 301 00:14:12,280 --> 00:14:15,320 Speaker 5: Okay, so that's that. So we have I guess ten 302 00:14:15,400 --> 00:14:17,440 Speaker 5: days to get to the next chapter here. But he's 303 00:14:17,440 --> 00:14:20,840 Speaker 5: still former president shub is still going to be down 304 00:14:20,880 --> 00:14:22,960 Speaker 5: in a courtroom in Manhattan today, right. 305 00:14:22,920 --> 00:14:23,720 Speaker 4: Right, that's correct. 306 00:14:23,760 --> 00:14:25,920 Speaker 6: He has a hearing in what is probably going to 307 00:14:25,960 --> 00:14:28,960 Speaker 6: be his first criminal trial. They haven't scheduled the new 308 00:14:29,040 --> 00:14:30,960 Speaker 6: date for that yet. It was supposed to start today, 309 00:14:30,960 --> 00:14:33,520 Speaker 6: but they delayed it because of some new evidence. So 310 00:14:33,600 --> 00:14:36,800 Speaker 6: he's been in court with his lawyers this morning. His 311 00:14:36,920 --> 00:14:38,920 Speaker 6: lawyers are getting grilled a bit by the judge in 312 00:14:38,920 --> 00:14:40,960 Speaker 6: that case. That it'll be interesting to see what happens 313 00:14:41,000 --> 00:14:43,680 Speaker 6: with that trial. They could set a new date for 314 00:14:43,720 --> 00:14:45,400 Speaker 6: that today, it could be as soon as next month. 315 00:14:45,520 --> 00:14:46,840 Speaker 2: And what is the argument here? 316 00:14:46,880 --> 00:14:46,960 Speaker 7: Like? 317 00:14:47,120 --> 00:14:48,000 Speaker 2: Which one is this one? 318 00:14:48,440 --> 00:14:50,880 Speaker 6: This is the so called hush money case. He's accused 319 00:14:50,920 --> 00:14:54,480 Speaker 6: of falsifying business records to conceal hush money payments to 320 00:14:54,520 --> 00:14:57,080 Speaker 6: a porn star before the twenty sixteen election. 321 00:14:58,080 --> 00:15:01,200 Speaker 5: And he still had such Okay, so we get this one, 322 00:15:01,600 --> 00:15:04,360 Speaker 5: and there's still some other things going on right right there? 323 00:15:04,480 --> 00:15:06,400 Speaker 5: I mean the January I guess that the January sixth 324 00:15:06,480 --> 00:15:09,600 Speaker 5: case is that federal in Washington. And do we have 325 00:15:09,800 --> 00:15:11,200 Speaker 5: any sense of timing on that? 326 00:15:11,560 --> 00:15:13,840 Speaker 6: I wish, I wish I knew we still have any 327 00:15:13,920 --> 00:15:16,520 Speaker 6: dates for the other three trials, not yet other three 328 00:15:16,560 --> 00:15:17,680 Speaker 6: trials you gotta keep on top of me. 329 00:15:18,120 --> 00:15:19,680 Speaker 2: I mean, do you like an Excel spreadsheet? 330 00:15:20,160 --> 00:15:20,440 Speaker 1: Yeah? 331 00:15:20,480 --> 00:15:24,120 Speaker 2: Okay, you do. Okay, he's literally not kidding. There's one 332 00:15:24,120 --> 00:15:27,160 Speaker 2: more question on the on the on the bond here, 333 00:15:27,600 --> 00:15:30,160 Speaker 2: What is your question now, Like, now that we know 334 00:15:30,200 --> 00:15:32,800 Speaker 2: the actual number and it's in that weird spot, higher 335 00:15:32,880 --> 00:15:34,920 Speaker 2: than he said he could pay, but much lower than 336 00:15:34,960 --> 00:15:36,280 Speaker 2: the original what is your question? 337 00:15:36,520 --> 00:15:38,960 Speaker 6: My question now is are they going to stand by 338 00:15:39,000 --> 00:15:41,240 Speaker 6: what they said, which was that there was no way 339 00:15:41,240 --> 00:15:42,760 Speaker 6: in the world that could get a bigger bond than 340 00:15:42,760 --> 00:15:46,480 Speaker 6: one hundred million, or are they going to say okay, 341 00:15:46,520 --> 00:15:48,680 Speaker 6: fine and circle back and try to see what they 342 00:15:48,680 --> 00:15:50,920 Speaker 6: can do because he said that if there was anything 343 00:15:50,920 --> 00:15:53,240 Speaker 6: more than one hundred million, he'd be forced to sell 344 00:15:53,320 --> 00:15:56,160 Speaker 6: some assets in order to raise that extra cash because 345 00:15:56,200 --> 00:15:59,120 Speaker 6: those companies that arrange bonds won't take his real estate 346 00:15:59,160 --> 00:15:59,800 Speaker 6: as collateral. 347 00:16:00,320 --> 00:16:02,160 Speaker 2: It's a head scratcher. Oh, I guess seventy five millions 348 00:16:02,200 --> 00:16:04,600 Speaker 2: better than you know, adding on four hundred months, right, Yeah, 349 00:16:04,720 --> 00:16:05,520 Speaker 2: I mean there is. 350 00:16:05,520 --> 00:16:07,720 Speaker 5: That'd be a good day for the for the president today, 351 00:16:07,760 --> 00:16:09,760 Speaker 5: just from how the math works. Eric, thanks so much 352 00:16:09,800 --> 00:16:12,880 Speaker 5: for literally running down from your news desks. To get 353 00:16:13,240 --> 00:16:16,360 Speaker 5: the latest. Here, Eric covers all the legal stuff for 354 00:16:16,520 --> 00:16:17,400 Speaker 5: Bloomberg News. 355 00:16:19,800 --> 00:16:23,640 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 356 00:16:23,760 --> 00:16:26,400 Speaker 1: weekdays at ten am Eastern on Affo, card Play and 357 00:16:26,400 --> 00:16:29,480 Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand 358 00:16:29,520 --> 00:16:33,200 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 359 00:16:34,520 --> 00:16:37,640 Speaker 2: On Friday, SMP posting it's best week of the year, 360 00:16:37,720 --> 00:16:41,240 Speaker 2: plus last week saw the most amount of SMP fifty 361 00:16:41,280 --> 00:16:43,160 Speaker 2: two week highs in nearly three years. I thought that 362 00:16:43,200 --> 00:16:45,200 Speaker 2: was a really fun step, right, that's a good one. 363 00:16:45,520 --> 00:16:46,360 Speaker 5: It goes to the breath of the. 364 00:16:46,280 --> 00:16:48,960 Speaker 2: Market exactly, So it's not just about tech, and we'll 365 00:16:49,000 --> 00:16:50,360 Speaker 2: kind of see you this play out as well as 366 00:16:50,400 --> 00:16:52,520 Speaker 2: tech comes under attack in Europe as well as the 367 00:16:52,600 --> 00:16:54,640 Speaker 2: chips in China. So joining us sound to discuss is 368 00:16:54,680 --> 00:16:58,240 Speaker 2: Katerina Simonetti, a Senior vice president Private wealth advisor over 369 00:16:58,280 --> 00:17:01,640 Speaker 2: at Morgan Stanley Private Wealth Management. Keterina, are we going 370 00:17:01,680 --> 00:17:05,080 Speaker 2: to expect the same kind of momentum within the S 371 00:17:05,119 --> 00:17:07,399 Speaker 2: and P and the overall US DOC market next quarter? 372 00:17:08,880 --> 00:17:11,119 Speaker 8: Alex, thank you for having me on the show. You 373 00:17:11,119 --> 00:17:13,359 Speaker 8: know what, an incredible start of the year, but really 374 00:17:13,520 --> 00:17:18,960 Speaker 8: first three months in and now is already approaching forty thousand. 375 00:17:20,080 --> 00:17:22,440 Speaker 8: You know, at least we're you know, seemingly a few 376 00:17:22,480 --> 00:17:25,960 Speaker 8: training sessions away, and the real question is going to 377 00:17:26,000 --> 00:17:29,480 Speaker 8: be are these price levels of equities are going to 378 00:17:29,520 --> 00:17:32,760 Speaker 8: be supported by earnings? You know, we're about to approach 379 00:17:33,080 --> 00:17:36,439 Speaker 8: this you know, quiet time, which usually what happens. The 380 00:17:36,520 --> 00:17:40,160 Speaker 8: bit of an information vacuum is something that we see 381 00:17:40,200 --> 00:17:43,760 Speaker 8: between the earning sessions. But when we come back with 382 00:17:43,920 --> 00:17:46,800 Speaker 8: new earning session in mid April, you know, the question 383 00:17:46,960 --> 00:17:52,560 Speaker 8: really for the the the that pricing, that that tailwind 384 00:17:52,720 --> 00:17:55,920 Speaker 8: for the prices and equities to continue going higher will 385 00:17:55,960 --> 00:17:59,040 Speaker 8: be all up to earnings and we're priced to perfection. Now, 386 00:17:59,240 --> 00:18:02,840 Speaker 8: the question is, you know, what can we expect going forward? 387 00:18:03,119 --> 00:18:03,199 Speaker 7: So? 388 00:18:03,320 --> 00:18:05,879 Speaker 5: How how do you feel about valuation in this market? 389 00:18:05,880 --> 00:18:06,159 Speaker 4: Are you? 390 00:18:06,520 --> 00:18:08,800 Speaker 5: A lot of some folks are saying, hey, if you 391 00:18:08,800 --> 00:18:11,760 Speaker 5: strip out some of those magnificent four, five, six, whateverever 392 00:18:11,760 --> 00:18:14,520 Speaker 5: the name names are today, you pull those out, the 393 00:18:14,560 --> 00:18:18,320 Speaker 5: market's you know that valuation seems okay? Do you do 394 00:18:18,440 --> 00:18:19,879 Speaker 5: that or how do you think of that valuation? 395 00:18:20,960 --> 00:18:23,920 Speaker 8: Well, the biggest question that we get from our clients 396 00:18:24,160 --> 00:18:26,520 Speaker 8: is when is it the good time to take the 397 00:18:26,560 --> 00:18:29,000 Speaker 8: profits of the table. When is the good time, you know, 398 00:18:29,080 --> 00:18:31,600 Speaker 8: to really realize some of these earnings. And it's a 399 00:18:31,640 --> 00:18:35,000 Speaker 8: really difficult question to answer because we can never effectively 400 00:18:35,040 --> 00:18:37,399 Speaker 8: pull either the top or the bottom of the market. 401 00:18:37,600 --> 00:18:40,320 Speaker 8: But we know that there are certain prices, you know, 402 00:18:40,400 --> 00:18:43,040 Speaker 8: that are higher than we've expected them to be in 403 00:18:43,119 --> 00:18:46,320 Speaker 8: certain areas of the market because of AI, because you know, 404 00:18:46,400 --> 00:18:49,800 Speaker 8: some technologies, some companies that are you know, looking to 405 00:18:49,840 --> 00:18:53,479 Speaker 8: increase their profitability through this investments in AI. You know so, 406 00:18:53,600 --> 00:18:56,720 Speaker 8: but this is not the time to be enamored with growth. 407 00:18:56,920 --> 00:18:59,399 Speaker 8: This is the time to take the total picture into 408 00:18:59,440 --> 00:19:03,560 Speaker 8: account and not give up on value just because this 409 00:19:03,640 --> 00:19:04,920 Speaker 8: bullish outlook in the market. 410 00:19:05,200 --> 00:19:07,199 Speaker 2: What does value mean to you? I feel like this 411 00:19:07,320 --> 00:19:09,000 Speaker 2: is like a meal, This is like a deep question. 412 00:19:09,240 --> 00:19:10,720 Speaker 2: But what is value to you right now? 413 00:19:12,160 --> 00:19:15,000 Speaker 8: Alex? You know, for many, many years, you know, one 414 00:19:15,080 --> 00:19:17,560 Speaker 8: of the stables of the ever suppried portfolios have been 415 00:19:17,600 --> 00:19:20,760 Speaker 8: this blue chip dividend being stocks. And this is the 416 00:19:20,840 --> 00:19:23,399 Speaker 8: sector in the market that has not performed quite as 417 00:19:23,480 --> 00:19:27,040 Speaker 8: well as these exciting growth names. But you know, the 418 00:19:27,320 --> 00:19:32,840 Speaker 8: areas like consumer stables, healthcare, financials, materials, industrials. You know, 419 00:19:32,960 --> 00:19:35,520 Speaker 8: in the long run. When we think of AI story 420 00:19:35,600 --> 00:19:38,640 Speaker 8: as a whole, all of these sectors tend to benefit 421 00:19:38,880 --> 00:19:42,679 Speaker 8: and the value of having these bluechip dividend being stocks 422 00:19:42,720 --> 00:19:45,119 Speaker 8: in the portfolio, you know, plays a huge role in 423 00:19:45,240 --> 00:19:48,000 Speaker 8: risk management. The other side of it this is, you know, 424 00:19:48,040 --> 00:19:50,960 Speaker 8: beyond your questions about the value, but also small and 425 00:19:51,119 --> 00:19:54,119 Speaker 8: MidCap you know stocks and the role they play, you know, 426 00:19:54,200 --> 00:19:56,760 Speaker 8: in this total portfolio construction. So there are a lot 427 00:19:56,800 --> 00:19:58,840 Speaker 8: of areas in the market that did not have this 428 00:19:59,000 --> 00:20:01,359 Speaker 8: huge drawn up. So this will be a good time 429 00:20:01,440 --> 00:20:03,399 Speaker 8: to take maybe a little bit of a profit and 430 00:20:03,480 --> 00:20:06,360 Speaker 8: move into some of the areas that are positioned for growth. 431 00:20:06,280 --> 00:20:10,280 Speaker 5: You know, looking for maybe different sectors that might be opportunistic. 432 00:20:10,680 --> 00:20:12,120 Speaker 5: You know, one of them is energy. I just look 433 00:20:12,119 --> 00:20:15,320 Speaker 5: at WTI crude oil up another one point seven percent today, 434 00:20:15,359 --> 00:20:17,840 Speaker 5: We're just about eighty two dollars a barrel in WTI 435 00:20:17,880 --> 00:20:20,360 Speaker 5: crude oil. How do you think about the the energy 436 00:20:20,760 --> 00:20:23,199 Speaker 5: space here? Again, people, I think there's a little bit 437 00:20:23,240 --> 00:20:25,800 Speaker 5: of concern about where are we in this transition to 438 00:20:25,840 --> 00:20:27,919 Speaker 5: green energy? Is it's slowing down? How do we think 439 00:20:27,960 --> 00:20:28,320 Speaker 5: about that? 440 00:20:29,520 --> 00:20:33,879 Speaker 8: Now we're enthusiastic about the green energy and sustainable energy, 441 00:20:34,040 --> 00:20:36,840 Speaker 8: but you know, we're not quite there yet, and yet 442 00:20:36,920 --> 00:20:40,320 Speaker 8: the broader energy sector is under pressure because of the 443 00:20:40,440 --> 00:20:44,520 Speaker 8: overall geopolitical environment, you know. With that said, the demand 444 00:20:44,680 --> 00:20:48,040 Speaker 8: for energy is very strong, you know, so we like 445 00:20:48,320 --> 00:20:51,639 Speaker 8: energy as this sector that plays the role in the portfolio. 446 00:20:52,000 --> 00:20:56,000 Speaker 8: Energy companies, you know, pay excellent dividends. And because of 447 00:20:56,040 --> 00:21:00,159 Speaker 8: the strong demand and increasing demand in the world and 448 00:21:00,359 --> 00:21:03,119 Speaker 8: the fact that we're not quite ready to switch into 449 00:21:03,200 --> 00:21:05,600 Speaker 8: the green and energy sources quite yet, you know, we 450 00:21:05,680 --> 00:21:08,639 Speaker 8: hope this happens soon, you know, but for now, you know, 451 00:21:08,720 --> 00:21:12,080 Speaker 8: we love him and having energy exposure and our portfolios. 452 00:21:12,280 --> 00:21:14,920 Speaker 2: So to that point, Paul, for the quarter to date, 453 00:21:15,000 --> 00:21:17,480 Speaker 2: we have communications services in tech. Okay, they're the top 454 00:21:17,480 --> 00:21:19,400 Speaker 2: performers in the S and p right, it's an Amazon 455 00:21:19,440 --> 00:21:22,040 Speaker 2: big tech story. But energy is up over eleven percent, 456 00:21:22,200 --> 00:21:25,600 Speaker 2: Financials up ten percent, industrials up ten materials up six. 457 00:21:25,840 --> 00:21:27,560 Speaker 2: I mean, and if you just look at the last month, 458 00:21:27,600 --> 00:21:30,560 Speaker 2: it's really been those guys, the financials and energy industrials 459 00:21:30,760 --> 00:21:33,919 Speaker 2: that have really been outperforming. Do you think, Keterina, that 460 00:21:34,640 --> 00:21:39,000 Speaker 2: the movement into those kind of names will help offset 461 00:21:39,040 --> 00:21:40,440 Speaker 2: any weakness in tech? 462 00:21:42,240 --> 00:21:44,200 Speaker 8: Well, of course, Alex, and this is not to say 463 00:21:44,240 --> 00:21:45,360 Speaker 8: that we should give up on. 464 00:21:45,400 --> 00:21:47,679 Speaker 2: Tech, sure, sure, but like but the rotation will be 465 00:21:47,760 --> 00:21:49,399 Speaker 2: enough to support the headline level. 466 00:21:50,200 --> 00:21:53,280 Speaker 8: Absolutely, it is really the story. The real story, in 467 00:21:53,320 --> 00:21:56,240 Speaker 8: my opinion, is really the fact that all these innovations 468 00:21:56,240 --> 00:21:59,159 Speaker 8: in tech are going to have across the other industries, 469 00:21:59,400 --> 00:22:01,880 Speaker 8: and the fact that when we look at the previous year, 470 00:22:01,960 --> 00:22:05,879 Speaker 8: the underperformance in these sectors, the valuations that look attractive, 471 00:22:05,960 --> 00:22:09,160 Speaker 8: the competitive positioning, the fact that these companies have been 472 00:22:09,320 --> 00:22:12,320 Speaker 8: very smart with their costs. You know, they're running you know, 473 00:22:12,440 --> 00:22:16,280 Speaker 8: the good, good models, and their prices are looking attractive. 474 00:22:16,480 --> 00:22:19,160 Speaker 8: You know, especially when we think about the environment, where 475 00:22:19,160 --> 00:22:22,640 Speaker 8: we're expecting few rate cuts and you know, it will 476 00:22:22,680 --> 00:22:26,439 Speaker 8: be easier for these companies to broader their profit margin 477 00:22:26,680 --> 00:22:29,320 Speaker 8: in the environmental rates are a little bit lower than where 478 00:22:29,320 --> 00:22:30,000 Speaker 8: they are today. 479 00:22:30,760 --> 00:22:33,199 Speaker 5: And ketterine it last week was a week of for 480 00:22:33,359 --> 00:22:35,520 Speaker 5: much of us to hear from the central bankers around 481 00:22:35,640 --> 00:22:38,199 Speaker 5: the world, and I guess the tone coming out of 482 00:22:38,240 --> 00:22:41,000 Speaker 5: not only the FED but some other central banks is 483 00:22:41,040 --> 00:22:43,360 Speaker 5: probably a little bit more dubbish than maybe people had 484 00:22:43,960 --> 00:22:46,800 Speaker 5: thought going into last week. What's your take about how 485 00:22:47,359 --> 00:22:49,119 Speaker 5: the FED is going to kind of behave over the 486 00:22:49,119 --> 00:22:49,720 Speaker 5: coming months. 487 00:22:50,960 --> 00:22:53,639 Speaker 8: Well, it's hard to know what they're going to do it. 488 00:22:53,720 --> 00:22:56,679 Speaker 8: Even if we look at the projection of expectations this 489 00:22:56,880 --> 00:23:00,840 Speaker 8: year alone, we started in January expecting for rate cuts, 490 00:23:00,920 --> 00:23:02,879 Speaker 8: and right now there are opinions out there that there 491 00:23:02,920 --> 00:23:05,480 Speaker 8: will not be rate cuts at all. At Morgan Stanley, 492 00:23:05,560 --> 00:23:08,720 Speaker 8: we still expect that we're going to have three rate cuts, 493 00:23:08,840 --> 00:23:11,200 Speaker 8: and that FED is, you know, at this point his 494 00:23:11,359 --> 00:23:14,399 Speaker 8: position to do just that, you know, But what we 495 00:23:14,600 --> 00:23:18,240 Speaker 8: tell our clients is that they should not necessarily, you know, 496 00:23:18,359 --> 00:23:22,119 Speaker 8: adjust or make drastic changes in their portfolios based on 497 00:23:22,200 --> 00:23:24,960 Speaker 8: the FED action. You know, in the going forward, of course, 498 00:23:25,040 --> 00:23:27,199 Speaker 8: any type of right cuts we get is going to 499 00:23:27,240 --> 00:23:29,639 Speaker 8: be the economic stimulus. It's something that is going to 500 00:23:29,680 --> 00:23:31,840 Speaker 8: benefit the economy in the long run, but in the 501 00:23:31,880 --> 00:23:36,560 Speaker 8: short run it is really more earnings, labor market overall, 502 00:23:36,800 --> 00:23:39,000 Speaker 8: you know, strength of the economy that is proven to 503 00:23:39,000 --> 00:23:41,000 Speaker 8: be much more resilient that you know. 504 00:23:40,960 --> 00:23:41,600 Speaker 4: That we thought. 505 00:23:42,119 --> 00:23:44,399 Speaker 2: And then to that point, I wonder that if the 506 00:23:44,480 --> 00:23:47,880 Speaker 2: way to express rate cuts, whether it's three, two or one, 507 00:23:47,880 --> 00:23:49,760 Speaker 2: because I think it was Bostic was really talking about 508 00:23:49,800 --> 00:23:53,200 Speaker 2: maybe one cut. You also have Lisa Cook speaking right now. 509 00:23:53,240 --> 00:23:56,359 Speaker 2: She says disinflation has been bumpy and uneven, and cutting 510 00:23:56,359 --> 00:23:59,320 Speaker 2: too late could wind up hurting, and cutting too soon 511 00:23:59,520 --> 00:24:01,320 Speaker 2: could also so heard on the growth and then the 512 00:24:01,320 --> 00:24:03,800 Speaker 2: inflation front. So if you're trying to gain that out, 513 00:24:04,040 --> 00:24:05,200 Speaker 2: how do you express that? 514 00:24:07,600 --> 00:24:10,000 Speaker 8: Well, you know, I think that that one clear action 515 00:24:10,160 --> 00:24:12,560 Speaker 8: right now is to take advantage of the higher uelds 516 00:24:12,600 --> 00:24:15,439 Speaker 8: and fixed income while they're still available, because you know, 517 00:24:15,600 --> 00:24:18,119 Speaker 8: the it seems like we've had money market rates at 518 00:24:18,160 --> 00:24:20,720 Speaker 8: five percent forever, but it really only has been a 519 00:24:20,760 --> 00:24:24,439 Speaker 8: short time the timeframe while this has been available, you know, 520 00:24:24,560 --> 00:24:27,960 Speaker 8: and FED is going to react based of economic data. 521 00:24:28,040 --> 00:24:31,120 Speaker 8: They I think that that we can expect some type 522 00:24:31,160 --> 00:24:34,000 Speaker 8: of right cuts and there is that also immediate reaction. 523 00:24:34,800 --> 00:24:39,600 Speaker 8: Historically large cap stocks react very positively. There's almost this 524 00:24:39,760 --> 00:24:43,200 Speaker 8: delayed reaction in small and midcaps, you know. So if 525 00:24:43,240 --> 00:24:45,919 Speaker 8: we look at the effect of the rate cuts, you know, 526 00:24:46,000 --> 00:24:49,080 Speaker 8: whether we get three this year, whether we get less, 527 00:24:49,119 --> 00:24:52,959 Speaker 8: whether they're pushed into twenty twenty five. But FED is 528 00:24:53,000 --> 00:24:56,680 Speaker 8: going to react to economic data, and you know, we're 529 00:24:56,680 --> 00:24:58,840 Speaker 8: paying attention to the same numbers, all. 530 00:24:58,840 --> 00:25:01,000 Speaker 5: Right, Katerina, thanks so much for joining us. Really appreciate it. 531 00:25:01,040 --> 00:25:03,040 Speaker 5: As always kind of read a Semonettie She's a senior 532 00:25:03,119 --> 00:25:07,160 Speaker 5: vice president private wealth advisor at Morgan Stanley Private Wealth Management. 533 00:25:07,280 --> 00:25:11,480 Speaker 5: Joining us from the town of Brotherly Love, Philadelphia via Zoomier. 534 00:25:13,080 --> 00:25:16,960 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 535 00:25:17,040 --> 00:25:20,080 Speaker 1: weekdays at ten am Eastern on Apple car Play and 536 00:25:20,080 --> 00:25:22,960 Speaker 1: Android Auto with the Bloomberg Business app. You can also 537 00:25:23,080 --> 00:25:26,280 Speaker 1: listen live on Amazon Alexa from our flagship New York 538 00:25:26,320 --> 00:25:30,800 Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty. 539 00:25:30,880 --> 00:25:34,199 Speaker 5: All right, a story that is out there for the 540 00:25:34,240 --> 00:25:37,080 Speaker 5: technology companies. It seems like we've seen this play before. 541 00:25:37,640 --> 00:25:42,400 Speaker 5: The European regulators they're not too happy or they take 542 00:25:42,440 --> 00:25:44,959 Speaker 5: a much heavier hand in terms of a regulatory oversight 543 00:25:45,040 --> 00:25:48,440 Speaker 5: to some of the big US technology companies. I'm thinking Apple, 544 00:25:48,480 --> 00:25:51,480 Speaker 5: I'm thinking Google, I'm thinking Meta and that's back in 545 00:25:51,520 --> 00:25:54,080 Speaker 5: the news here today. Mandy Singh joins US senior tech 546 00:25:54,359 --> 00:25:57,320 Speaker 5: analyst for Bloomberg Intelligence. Joinings here in a Bloomberg Interactive 547 00:25:57,320 --> 00:26:01,760 Speaker 5: Brokers studio. So, Mandy, those of a certain vintage like myself, 548 00:26:01,800 --> 00:26:04,120 Speaker 5: I can remember back to the late eighties early nineties 549 00:26:04,160 --> 00:26:08,280 Speaker 5: when it was Microsoft that really was under the regulatory 550 00:26:08,440 --> 00:26:12,359 Speaker 5: microscope of the European regulators. And the net result, it seems, 551 00:26:12,400 --> 00:26:14,320 Speaker 5: if I think back, was just a lot of checks 552 00:26:14,320 --> 00:26:17,520 Speaker 5: being written, a lot of fines being paid, but nothing 553 00:26:17,600 --> 00:26:20,399 Speaker 5: more than that. To the overall business model of Microsoft. 554 00:26:20,440 --> 00:26:22,879 Speaker 5: I either still that office, you know, bundle and so 555 00:26:22,960 --> 00:26:25,440 Speaker 5: on and so forth. Talk to us about what's going 556 00:26:25,480 --> 00:26:28,199 Speaker 5: on from Europe today as European regulars look at some 557 00:26:28,200 --> 00:26:29,760 Speaker 5: of these big US technology companies. 558 00:26:30,119 --> 00:26:32,280 Speaker 7: Yeah, and just to you know, start off with that 559 00:26:32,359 --> 00:26:35,520 Speaker 7: Microsoft comparison, I think one thing that did happen was 560 00:26:35,560 --> 00:26:39,000 Speaker 7: a change in behavior. So you could expect something similar 561 00:26:39,080 --> 00:26:43,080 Speaker 7: with these companies, even though you know it's unlikely they're 562 00:26:43,080 --> 00:26:45,680 Speaker 7: going to be broken up because of this, but you 563 00:26:45,760 --> 00:26:48,200 Speaker 7: can expect a change in behavior in terms of how 564 00:26:48,200 --> 00:26:51,400 Speaker 7: they operate. And the reason I say that is Microsoft 565 00:26:51,720 --> 00:26:53,080 Speaker 7: was an operating system company. 566 00:26:53,200 --> 00:26:53,400 Speaker 1: YEP. 567 00:26:53,720 --> 00:26:57,560 Speaker 7: They were layering on their Internet Explorer browser. What the 568 00:26:57,640 --> 00:27:00,320 Speaker 7: regulation intended to do was to decouple the two in 569 00:27:00,440 --> 00:27:03,520 Speaker 7: terms of giving more choices to the users. You're seeing 570 00:27:03,640 --> 00:27:07,160 Speaker 7: EU kind of pretty much play to that point where 571 00:27:07,560 --> 00:27:11,920 Speaker 7: these companies Apple and Google, they have the operating system, 572 00:27:12,119 --> 00:27:14,960 Speaker 7: they have the app store. They bundle a lot of 573 00:27:14,960 --> 00:27:17,800 Speaker 7: their own apps, right, so you have to use their 574 00:27:17,840 --> 00:27:20,159 Speaker 7: app store, give them a thirty percent commission, you have 575 00:27:20,200 --> 00:27:23,280 Speaker 7: to use Safari browser, you have to use Google Maps. 576 00:27:23,560 --> 00:27:26,919 Speaker 7: So that's what I think regulators are focused on. I 577 00:27:26,920 --> 00:27:29,600 Speaker 7: think they are probably five ten years too late. I mean, 578 00:27:29,640 --> 00:27:32,640 Speaker 7: look at you know all these The reason why they're 579 00:27:32,680 --> 00:27:34,879 Speaker 7: so big is because they operated like this for the 580 00:27:34,960 --> 00:27:35,800 Speaker 7: last ten years. 581 00:27:36,119 --> 00:27:38,200 Speaker 2: This is such a great point because like, I don't 582 00:27:38,200 --> 00:27:40,080 Speaker 2: want any of that to change because it'll make it 583 00:27:40,119 --> 00:27:42,879 Speaker 2: more annoying for me to do stuff on my phone. So, 584 00:27:43,040 --> 00:27:44,879 Speaker 2: like to your point of it being too late in 585 00:27:44,920 --> 00:27:47,240 Speaker 2: the beginning when I was adopting the iPhone, maybe, but 586 00:27:47,400 --> 00:27:50,200 Speaker 2: now that's just a pain. Is this going to hurt 587 00:27:50,200 --> 00:27:51,280 Speaker 2: them to make this case? 588 00:27:51,800 --> 00:27:55,240 Speaker 7: I mean regulation is always an afterthought. We have seen 589 00:27:55,280 --> 00:27:57,960 Speaker 7: that time and again. It comes in too late. And 590 00:27:58,480 --> 00:28:02,280 Speaker 7: look in this case, they are vouching for more open 591 00:28:02,520 --> 00:28:06,080 Speaker 7: app stores. So instead of Apple taking a thirty percent 592 00:28:06,119 --> 00:28:09,640 Speaker 7: cut and forcing everybody to use their payments platform, it's 593 00:28:09,680 --> 00:28:11,640 Speaker 7: about having third party platforms. 594 00:28:11,840 --> 00:28:11,959 Speaker 4: Now. 595 00:28:12,000 --> 00:28:14,280 Speaker 7: The one caveat there is if you bring in third 596 00:28:14,320 --> 00:28:17,800 Speaker 7: party platforms, gets what Google can launch their own app 597 00:28:17,840 --> 00:28:22,320 Speaker 7: store on iOS right now, Google, you know app store 598 00:28:22,359 --> 00:28:26,120 Speaker 7: is used in Android. If you start opening up the platform, 599 00:28:26,200 --> 00:28:29,159 Speaker 7: who does it benefit the most. I would argue Google 600 00:28:29,480 --> 00:28:32,320 Speaker 7: because then they can put their app store on iOS. 601 00:28:32,440 --> 00:28:35,840 Speaker 7: You can pay through the Google Android App Store on iOS. 602 00:28:36,240 --> 00:28:39,760 Speaker 7: So I think in effect, then even though the regulation 603 00:28:39,920 --> 00:28:43,920 Speaker 7: is well intended, it may actually end up, you know, 604 00:28:44,040 --> 00:28:47,640 Speaker 7: favoring Google if it turns out to the way I 605 00:28:47,680 --> 00:28:50,960 Speaker 7: think it is because the likes of Spotify and Netflix, 606 00:28:51,280 --> 00:28:53,960 Speaker 7: they're not going to create a new app store. It's 607 00:28:54,080 --> 00:28:57,600 Speaker 7: peanuts when it comes to saving on payments costs, Like, 608 00:28:57,640 --> 00:28:59,840 Speaker 7: what are you getting out of investing so much into 609 00:29:00,400 --> 00:29:02,800 Speaker 7: your own app store. Yes, it's good to have an 610 00:29:02,840 --> 00:29:05,560 Speaker 7: open platform. That's what Epic has been arguing. And you 611 00:29:05,560 --> 00:29:09,240 Speaker 7: know all the gaming companies, but I think the one 612 00:29:09,280 --> 00:29:11,320 Speaker 7: company it benefits the most here is Google. 613 00:29:11,720 --> 00:29:15,600 Speaker 5: That's actually pretty funny, all right, So just for thirty seconds, 614 00:29:16,240 --> 00:29:19,800 Speaker 5: how our investors thinking about this risk, the regulatory risks 615 00:29:19,840 --> 00:29:21,880 Speaker 5: to these big tech companies. How are they thinking about it? 616 00:29:21,880 --> 00:29:24,080 Speaker 7: I mean it's different from different companies. I think the 617 00:29:24,120 --> 00:29:28,920 Speaker 7: operating system gatekeeper analogy applies to Apple and Google specifically 618 00:29:29,320 --> 00:29:33,720 Speaker 7: for meta. They want you to pay to subscribe to 619 00:29:33,800 --> 00:29:36,320 Speaker 7: the apps if you don't want to be tracked. Now 620 00:29:36,360 --> 00:29:39,560 Speaker 7: that's interesting, right, we are so accustomed to using social 621 00:29:39,640 --> 00:29:42,360 Speaker 7: media apps as free because our data is what they 622 00:29:42,440 --> 00:29:44,680 Speaker 7: use for targeting. If you don't want to be tracked, 623 00:29:44,680 --> 00:29:46,959 Speaker 7: you have to pay meta, and I think that's not 624 00:29:47,000 --> 00:29:49,080 Speaker 7: going to be palatable for users. 625 00:29:49,120 --> 00:29:51,240 Speaker 2: So I love Mandy cuts through it right now. I 626 00:29:51,320 --> 00:29:53,400 Speaker 2: get it all right, Mandy, thanks lot really appreciate it 627 00:29:53,440 --> 00:29:55,920 Speaker 2: and keep saying Joining us from Bloomering Intelligence. 628 00:29:58,400 --> 00:30:01,959 Speaker 1: You're listening to the Bloomberg and Intelligence Podcast. Catch us 629 00:30:02,000 --> 00:30:05,400 Speaker 1: live weekdays at ten am Eastern on applecar Play and 630 00:30:05,400 --> 00:30:08,320 Speaker 1: Android Otto with the Bloomberg Business app. You can also 631 00:30:08,400 --> 00:30:11,560 Speaker 1: listen live on Amazon Alexa from our flagship New York 632 00:30:11,640 --> 00:30:17,200 Speaker 1: station Just Say Alexa, playing Bloomberg eleven thirty. 633 00:30:16,720 --> 00:30:18,560 Speaker 5: Thirty five years on Walstreet. I've had the pleasure of 634 00:30:18,600 --> 00:30:22,240 Speaker 5: working some really really good groups of people, and none 635 00:30:22,240 --> 00:30:25,240 Speaker 5: better Mount Rushmore type where the people of Payne Webber 636 00:30:25,280 --> 00:30:27,920 Speaker 5: nineteen eighty six and nineteen eighty nine, the Management, Audit 637 00:30:27,960 --> 00:30:31,280 Speaker 5: and Control group, don't ask, it's top secret. Mike Sullivan 638 00:30:31,400 --> 00:30:33,760 Speaker 5: ran that group, and pretty much everybody in that group 639 00:30:33,760 --> 00:30:35,959 Speaker 5: went on to have a pretty darn good career, and 640 00:30:36,160 --> 00:30:39,360 Speaker 5: none more than my man Joe DEGROSSI he's the chairman, 641 00:30:39,400 --> 00:30:41,680 Speaker 5: He's the Sea of Axis Capital I'm scared to ask 642 00:30:41,720 --> 00:30:44,760 Speaker 5: what Access Capital is. But he is in Miami, Florida, 643 00:30:44,760 --> 00:30:47,880 Speaker 5: and he did that decades before that it became trendy here. 644 00:30:47,920 --> 00:30:49,560 Speaker 5: He's been down there kind of running money down there 645 00:30:49,560 --> 00:30:51,720 Speaker 5: for a long time. Joe, thanks so much for joining us. 646 00:30:51,720 --> 00:30:53,400 Speaker 5: You're one of the off time greats. Tell us what 647 00:30:53,520 --> 00:30:56,080 Speaker 5: you're up to at Axis Capital these days? 648 00:30:56,480 --> 00:30:59,680 Speaker 9: Got well, first of all, that throwback to the mid 649 00:30:59,760 --> 00:31:03,160 Speaker 9: eight's just just dated me. So but it's nice here, 650 00:31:03,200 --> 00:31:06,400 Speaker 9: your boy. It's been way too long. So in a 651 00:31:06,400 --> 00:31:08,920 Speaker 9: few things. I've been down here in Miami twenty six 652 00:31:09,000 --> 00:31:12,360 Speaker 9: years now. I moved from Paineweber and joined a private 653 00:31:12,360 --> 00:31:15,480 Speaker 9: equity firm that turned out to be pretty successful, and 654 00:31:15,760 --> 00:31:18,160 Speaker 9: launched my own firm some years ago, and so run 655 00:31:18,200 --> 00:31:21,280 Speaker 9: a family office as well as private equity shop down 656 00:31:21,320 --> 00:31:21,880 Speaker 9: here in Miami. 657 00:31:22,280 --> 00:31:25,600 Speaker 5: So what do you guys doing in the markets here today. 658 00:31:25,640 --> 00:31:28,760 Speaker 5: I'm guessing you're not running a sixty forty portfolio, Joe. 659 00:31:29,560 --> 00:31:33,480 Speaker 9: Clearly not running a sixty forty portfolio. Are main focused today, 660 00:31:33,560 --> 00:31:35,680 Speaker 9: as you can probably see by the background, at least 661 00:31:35,720 --> 00:31:38,720 Speaker 9: for viewers who are watching the live stream, you know, 662 00:31:38,760 --> 00:31:42,960 Speaker 9: we're focused on with Access Capital introducing Interval Funds really 663 00:31:43,000 --> 00:31:47,600 Speaker 9: focused on this massive underserved market of accredited investors, folks 664 00:31:47,640 --> 00:31:50,680 Speaker 9: with sort of one to five million that represent the 665 00:31:51,000 --> 00:31:54,400 Speaker 9: mass affluent that up to now really have not been 666 00:31:54,440 --> 00:31:57,200 Speaker 9: able to invest in private investment. So we think the 667 00:31:57,240 --> 00:32:00,520 Speaker 9: next big wave in the capital markets will be a 668 00:32:00,720 --> 00:32:06,000 Speaker 9: significant reallocation among i'll called the mass affluent into private investing. 669 00:32:06,040 --> 00:32:09,480 Speaker 9: Because they're living longer, they need to match assets and 670 00:32:09,600 --> 00:32:13,760 Speaker 9: liabilities to make sure they don't outlive their income. And 671 00:32:13,880 --> 00:32:16,560 Speaker 9: so we're building a suite of products that we believe 672 00:32:16,640 --> 00:32:20,360 Speaker 9: will serve that accredited investor market very well. 673 00:32:20,520 --> 00:32:23,200 Speaker 2: Okay, let's just we're burying all the leads here. People. 674 00:32:23,720 --> 00:32:25,280 Speaker 2: What was Paul like in the eighties. 675 00:32:26,920 --> 00:32:29,880 Speaker 9: Paul was fantastic. I mean, I have nothing but thought 676 00:32:30,040 --> 00:32:32,200 Speaker 9: memories Paul. And it's been too long, and I know 677 00:32:32,200 --> 00:32:34,600 Speaker 9: we're due to have a reunion pretty soon. But Paul 678 00:32:34,720 --> 00:32:35,880 Speaker 9: was a great out to work with. 679 00:32:36,320 --> 00:32:37,000 Speaker 4: He really was. 680 00:32:37,440 --> 00:32:39,360 Speaker 5: It's funny we had a great group. 681 00:32:39,400 --> 00:32:39,640 Speaker 4: Again. 682 00:32:39,640 --> 00:32:41,240 Speaker 5: If I got my Pain Weber group, I've got my 683 00:32:41,320 --> 00:32:43,640 Speaker 5: Chase Manhattan group, my Salomon Brothers group. That the Pain 684 00:32:43,680 --> 00:32:47,040 Speaker 5: Weber group almost person for person, I'm talking to a 685 00:32:47,040 --> 00:32:50,160 Speaker 5: couple dozen people went on to have really good careers. 686 00:32:50,160 --> 00:32:51,480 Speaker 5: We kind of thought Joe was going to be the 687 00:32:51,480 --> 00:32:54,120 Speaker 5: black cheep, but he's ended up doing the best here. 688 00:32:54,160 --> 00:32:57,800 Speaker 5: He's still added here, Joe. You mentioned private credit here. 689 00:32:58,160 --> 00:33:01,360 Speaker 5: That's been a market that I've been really amazed to 690 00:33:01,400 --> 00:33:04,360 Speaker 5: watch developerally over the last ten to fifteen years. It 691 00:33:04,440 --> 00:33:06,160 Speaker 5: used to be kind of private equity is the place 692 00:33:06,200 --> 00:33:08,120 Speaker 5: you go to for some outsize returns. How do you 693 00:33:08,120 --> 00:33:09,520 Speaker 5: guys think about private credit? 694 00:33:11,240 --> 00:33:14,400 Speaker 9: Well, you know, look, I think private credit has stepped 695 00:33:14,440 --> 00:33:17,880 Speaker 9: in where the banks have walked away, and regulations on 696 00:33:17,920 --> 00:33:20,640 Speaker 9: the banking side have made it, you know, challenging for 697 00:33:21,080 --> 00:33:24,320 Speaker 9: banks to maintain market share in that space. And so 698 00:33:24,400 --> 00:33:29,760 Speaker 9: you've had a you know, a proliferation of funds credit 699 00:33:29,760 --> 00:33:32,080 Speaker 9: funds getting into this space. And of course, Paul, as 700 00:33:32,120 --> 00:33:33,920 Speaker 9: you know, you know, interest rates have been on the 701 00:33:33,960 --> 00:33:37,000 Speaker 9: side of credit for a long time up until recently, 702 00:33:37,080 --> 00:33:39,040 Speaker 9: up until twenty two, but they wrote a ten to 703 00:33:39,040 --> 00:33:42,239 Speaker 9: fifteen year wave of a declining interest rate environment. So 704 00:33:42,280 --> 00:33:45,760 Speaker 9: the total returns have looked particularly strong in that space. 705 00:33:46,000 --> 00:33:49,640 Speaker 9: I think what we're going to see now prospectively is, 706 00:33:50,240 --> 00:33:54,080 Speaker 9: you know, the major comeback of private equity. I think 707 00:33:54,120 --> 00:33:56,120 Speaker 9: that's going to be the place to be over the 708 00:33:56,160 --> 00:33:59,080 Speaker 9: next five to ten years, notwithstanding a lot of talk 709 00:33:59,120 --> 00:34:01,800 Speaker 9: about capital flow into that space over the years. 710 00:34:02,160 --> 00:34:04,040 Speaker 2: Okay, first of all, you guys are both serious and 711 00:34:04,040 --> 00:34:07,040 Speaker 2: disappointing me of what Paul is like twenty forty years ago. 712 00:34:07,080 --> 00:34:09,880 Speaker 2: But whatever, we'll let that slide. We use a private 713 00:34:09,880 --> 00:34:12,000 Speaker 2: equity because because I feel like it hasn't the whole 714 00:34:12,040 --> 00:34:14,160 Speaker 2: thing been none on private credit, not private equity. 715 00:34:14,200 --> 00:34:18,040 Speaker 9: Now, well, it's interesting. I mean, there's I don't know, 716 00:34:18,120 --> 00:34:21,080 Speaker 9: eighty or ninety interval funds now in the credit space, 717 00:34:21,440 --> 00:34:25,560 Speaker 9: maybe a dozen equity funds. So you know, people have 718 00:34:25,600 --> 00:34:28,319 Speaker 9: been chasing returns and they've been looking in the rear 719 00:34:28,400 --> 00:34:32,200 Speaker 9: view mirror. I think the future looking forward is is 720 00:34:32,239 --> 00:34:34,800 Speaker 9: allocations to private equity. And I'll tell you for a 721 00:34:34,880 --> 00:34:38,919 Speaker 9: very simple reason. You know, people are living longer. They 722 00:34:39,120 --> 00:34:42,800 Speaker 9: you know clearly, you know, there's this massive generational transfer 723 00:34:42,800 --> 00:34:46,680 Speaker 9: of wealth from a risk averse generation to a risk 724 00:34:46,719 --> 00:34:50,040 Speaker 9: tollering generation that I think is more informed. They know 725 00:34:50,080 --> 00:34:52,640 Speaker 9: they're going to live on average three to five years longer, 726 00:34:53,080 --> 00:34:55,920 Speaker 9: you know, than their parents or certainly their their grandparents, 727 00:34:55,960 --> 00:34:58,759 Speaker 9: and they're going to have to allocate capital accordingly. And 728 00:34:58,800 --> 00:35:00,680 Speaker 9: that means over the long term, you know, as we 729 00:35:00,719 --> 00:35:04,800 Speaker 9: know equities over the long term, you know, trounce fixed income, 730 00:35:05,120 --> 00:35:07,520 Speaker 9: notwithstanding what's happened over the past ten years. 731 00:35:07,960 --> 00:35:10,040 Speaker 5: So Joe, you were, as you mentioned, you got down 732 00:35:10,120 --> 00:35:13,719 Speaker 5: to South Florida way before it became trendy. Here talk 733 00:35:13,719 --> 00:35:17,279 Speaker 5: to us about how Miami has changed just over the 734 00:35:17,360 --> 00:35:20,319 Speaker 5: last four or five years. I mean, you know, kind 735 00:35:20,320 --> 00:35:22,719 Speaker 5: of pandemic. It seems like everybody and the brothers moving 736 00:35:22,760 --> 00:35:23,160 Speaker 5: down there. 737 00:35:24,239 --> 00:35:26,560 Speaker 9: It's it's really been incredible. I mean I've been down here, 738 00:35:26,560 --> 00:35:28,560 Speaker 9: as I said, you know, roughly twenty six years, and 739 00:35:28,760 --> 00:35:32,399 Speaker 9: we've seen more change in the past five years than 740 00:35:32,440 --> 00:35:35,560 Speaker 9: we saw on the prior all of twenty twenty one years. 741 00:35:35,719 --> 00:35:38,640 Speaker 9: And I think that's you know, certainly driven by COVID, 742 00:35:38,840 --> 00:35:42,640 Speaker 9: A no question about it. But I think COVID, you know, 743 00:35:42,840 --> 00:35:47,359 Speaker 9: in concert with technology, has made people realize and has 744 00:35:47,440 --> 00:35:50,719 Speaker 9: accelerated the understanding that you can be most anywhere in 745 00:35:50,760 --> 00:35:53,640 Speaker 9: the world and work and why not be in a 746 00:35:53,680 --> 00:35:56,040 Speaker 9: beautiful place. I mean when I moved down here, it 747 00:35:56,200 --> 00:35:58,759 Speaker 9: was really driven by the fact that an opportunity to 748 00:35:58,840 --> 00:36:01,160 Speaker 9: join a private equity shop, and it could have been 749 00:36:01,160 --> 00:36:05,080 Speaker 9: in Tuscaloosa, could have been in Idaho. Now what we're 750 00:36:05,120 --> 00:36:08,120 Speaker 9: seeing is is I called the sort of that Malcolm 751 00:36:08,160 --> 00:36:12,200 Speaker 9: Gladwell tipping point here in Miami, where you almost have 752 00:36:12,239 --> 00:36:14,000 Speaker 9: to be here as a firm, if you're in the 753 00:36:14,440 --> 00:36:17,040 Speaker 9: wealth management space, if you're in the private equity space, 754 00:36:17,719 --> 00:36:19,560 Speaker 9: you have to be here because this is where the 755 00:36:19,600 --> 00:36:22,000 Speaker 9: action is and it's a great quality of life. And 756 00:36:22,120 --> 00:36:24,279 Speaker 9: you know, we all know taxes are far lower down here. 757 00:36:24,680 --> 00:36:30,200 Speaker 2: So now you're fairly killing him, Joe exactly. 758 00:36:30,239 --> 00:36:35,080 Speaker 5: I'm sorry, Yeah, all right, So talk to what is 759 00:36:35,160 --> 00:36:38,600 Speaker 5: that you mentioned? Interval Capital, Joe, What's what is that concept? 760 00:36:40,120 --> 00:36:42,760 Speaker 9: Well, it's it's Access Capital is our firm, but we're 761 00:36:42,840 --> 00:36:45,759 Speaker 9: really focused on launching a suite of interval funds, and 762 00:36:45,760 --> 00:36:48,560 Speaker 9: it's really this, you know, this simple. The Investment Company 763 00:36:48,560 --> 00:36:52,359 Speaker 9: Act in nineteen forty basically says, if you're super rich, 764 00:36:52,560 --> 00:36:55,680 Speaker 9: qualified purchaser with five million or more, you can invest 765 00:36:55,719 --> 00:36:59,600 Speaker 9: in private equity and private credit funds. There's that line 766 00:36:59,640 --> 00:37:02,279 Speaker 9: of dem otion though. If you are not a you know, 767 00:37:02,360 --> 00:37:06,120 Speaker 9: a wealthy investor five million or more, you're basically shut out, 768 00:37:06,200 --> 00:37:10,480 Speaker 9: and there's there's only one way to offer products to 769 00:37:10,760 --> 00:37:13,680 Speaker 9: accredited investors. You know, folks with between one and five million, 770 00:37:13,880 --> 00:37:17,080 Speaker 9: and that's to register your vehicles. And that's the safe 771 00:37:17,080 --> 00:37:19,759 Speaker 9: harbor under the Investment Company Act of forty that says, 772 00:37:19,760 --> 00:37:22,200 Speaker 9: if you register your vehicles just like sort of like 773 00:37:22,239 --> 00:37:25,880 Speaker 9: an IPO, then you can bring in an unlimited number 774 00:37:25,920 --> 00:37:29,319 Speaker 9: of you know, I'll call them smaller investors. And you know, 775 00:37:29,400 --> 00:37:34,240 Speaker 9: what we're seeing is there's fifteen trillion dollars among accredited investors, 776 00:37:34,239 --> 00:37:37,239 Speaker 9: about one percent invested in private investments. 777 00:37:37,760 --> 00:37:38,040 Speaker 2: Uh. 778 00:37:38,360 --> 00:37:41,520 Speaker 9: Compare that to qualified purchasers, folks with five million or more, 779 00:37:41,680 --> 00:37:45,040 Speaker 9: who were at ten percent allocated to private investments. Goldman 780 00:37:45,160 --> 00:37:48,680 Speaker 9: Sachs's most recent Family Office report says that the family 781 00:37:48,719 --> 00:37:52,400 Speaker 9: offices are twenty seven percent invested in private investment. So 782 00:37:52,800 --> 00:37:55,000 Speaker 9: we believe the future is in the smaller investor. 783 00:37:55,960 --> 00:37:58,440 Speaker 5: Yeah, Joe, great to talk to you again, buddy. Always 784 00:37:58,480 --> 00:38:00,960 Speaker 5: good and always knew you're doing well down there in 785 00:38:00,960 --> 00:38:03,879 Speaker 5: South Florida, doing it way before anybody else. Was Joe 786 00:38:03,880 --> 00:38:06,360 Speaker 5: de Grossi. He's a chairman and CEO of Access Capital 787 00:38:06,880 --> 00:38:10,560 Speaker 5: based out in Miami, Florida. We both started our career 788 00:38:10,600 --> 00:38:13,080 Speaker 5: as Payne Webber June sixteenth, nineteen eazing. 789 00:38:13,239 --> 00:38:14,920 Speaker 2: Okay, so what was Joe like. 790 00:38:15,800 --> 00:38:18,719 Speaker 5: Funny, the really funny guy in our group. We had 791 00:38:18,719 --> 00:38:20,479 Speaker 5: a lot We actually just had a great group of people, 792 00:38:20,600 --> 00:38:23,359 Speaker 5: still very tight. We get together every year or two 793 00:38:23,520 --> 00:38:26,280 Speaker 5: dinner at Smith and Lenski's in mid time ahen people 794 00:38:26,280 --> 00:38:28,440 Speaker 5: come in flying from all over the world to come 795 00:38:28,480 --> 00:38:30,279 Speaker 5: in and kind of hook up because for a lot 796 00:38:30,320 --> 00:38:32,880 Speaker 5: of us it was the first job out of college 797 00:38:32,920 --> 00:38:34,920 Speaker 5: and it was a really tight group and we stayed 798 00:38:34,960 --> 00:38:38,319 Speaker 5: tight throughout the throughout the year. So it's a good group, 799 00:38:38,360 --> 00:38:41,279 Speaker 5: good way to start your career. Ye story. And see 800 00:38:41,320 --> 00:38:44,040 Speaker 5: that's the example I bring up. If you're working from 801 00:38:44,080 --> 00:38:46,200 Speaker 5: home and you don't get that, and I don't, and 802 00:38:46,239 --> 00:38:48,240 Speaker 5: I'll tell you what that's That's what it's all about 803 00:38:48,280 --> 00:38:49,920 Speaker 5: for me. So good stuff checking up. 804 00:38:50,160 --> 00:38:54,759 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apples, Spotter, Pye, 805 00:38:54,880 --> 00:38:57,800 Speaker 1: and anywhere else you will get your podcasts. Listen live 806 00:38:57,880 --> 00:39:01,480 Speaker 1: each weekday ten am to noon Eastern on Bloomberg dot Com, 807 00:39:01,600 --> 00:39:05,000 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 808 00:39:05,120 --> 00:39:08,120 Speaker 1: You can also watch us live every weekday on YouTube 809 00:39:08,320 --> 00:39:10,200 Speaker 1: and always on the Bloomberg terminal