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Speaker 2: Let's get back to John Tucker in our New York studio. John,
Speaker 2: Supreme Court. We got some rulings today, the notable on
Speaker 2: the crossing the tape. Supreme Court backs White House on
Speaker 2: social media post removal. What do we know about that?
Speaker 3: Yeah, the Court issuing several major decisions this week. They
Speaker 3: could also extend into next week. In fact, twelve opinions
Speaker 3: left in in this term. Paul on Alex Paper opinions
Speaker 3: released to the courthouse in Washington just a few minutes
Speaker 3: before they're posted online. June Grosso, the host of Bloomberg Law,
Speaker 3: joining me now to go over some of these decisions
Speaker 3: with respect to the Biden administration. They're social media contexts.
Speaker 3: What was the decision?
Speaker 4: So the decision, the complaint by a few Republican states
Speaker 4: and people was that the Biden administration, and this was
Speaker 4: during COVID was contacting the social media platforms and getting
Speaker 4: them to change information. That was the charge. So here
Speaker 4: in a six to three case, and both the cases
Speaker 4: today are six to three, which is indicative of how
Speaker 4: this term might end.
Speaker 5: Six to three.
Speaker 4: So the court went off on a standing issue, which
Speaker 4: is procedural, and I know I've discussed this before, but
Speaker 4: it's a way for the court not to reach the
Speaker 4: main issue, but to say the people who are suing
Speaker 4: here don't have standing to sue because they weren't injured
Speaker 4: in any way. But also in doing that, just as
Speaker 4: Amy Cony Barrett, who wrote the majority, said that the
Speaker 4: Fifth Circuit here was wrong in some of the analysis
Speaker 4: that it made and that they couldn't really show that
Speaker 4: it was the government that injured the plaintiffs at all
Speaker 4: these points. So you know, the question is and also
Speaker 4: it's sixty three in the.
Speaker 3: Three, So it sets up how this is going to
Speaker 3: play out before the election in terms of misinformation on
Speaker 3: social media.
Speaker 1: Right.
Speaker 4: Also, there are two other cases that are sort of
Speaker 4: joined that are more important as far as social media
Speaker 4: is concerned, and those are the cases concerning the Texas
Speaker 4: and Florida laws where they're trying to curtail the platforms
Speaker 4: into doing you know, into into and it's another thing
Speaker 4: like a conservative saying that you know they're being unfair
Speaker 4: to us, and it's a question of free speech. So
Speaker 4: the dissent here was the three most conservative justices, Alito, Gorsicic,
Speaker 4: and Thomas.
Speaker 3: How many more cases are going to be? Is that
Speaker 3: it for today?
Speaker 4: There's one other case on public corruption, something that we
Speaker 4: haven't been following, but it continues the Supreme Court's skepticism
Speaker 4: of these public corruption laws.
Speaker 3: All right, June Grasso, the host of Bloomberg Law, with
Speaker 3: me to break down some of these cases. The Supreme
Speaker 3: Court again backing the Biden administration on the social post
Speaker 3: media removal in terms of cases that go against the arguments.
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Speaker 5: Let's get back to FedEx.
Speaker 6: Thomas black is the Bloomberg opinion columnists covering logistics, manufacturing,
Speaker 6: and aerospace, joining us.
Speaker 5: Now, So what did you make of that news? In particular?
Speaker 6: A strategic spinoff maybe, or strategic options, I should say
Speaker 6: for its freight unit.
Speaker 5: That pretty much surprised a lot of analysts. What did
Speaker 5: you make of that?
Speaker 7: It was surprising. It potentially could unlock a lot of value,
Speaker 7: and I think that's why the stock price is up
Speaker 7: around fifteen percent today. Investors see that as kind of
Speaker 7: a little gold nugget that's been hidden in FedEx. It's
Speaker 7: the largest less than truckload carrier, and those trucking companies
Speaker 7: tend to have pretty high valuations right now, so they
Speaker 7: could definitely unlock some value.
Speaker 2: So is the expectation that they will spin that out
Speaker 2: or ipo it. What mechanism were they discussing?
Speaker 7: Do you think they didn't want to talk about it?
Speaker 7: They were asked several questions about that on the conference call,
Speaker 7: and they batted them all away. They're going to review it.
Speaker 7: Spin out would be would be easier to do, probably
Speaker 7: more tax friendly as well. They could sell it, sure
Speaker 7: there would be some interested buyers in there. It's a
Speaker 7: pretty high margin business for the trucking company, for trucking
Speaker 7: industry IPO. I presume they could do that as well.
Speaker 7: A spin would probably be the better way to get it,
Speaker 7: you know, trading.
Speaker 2: Yep, you know, just looking at this just the most
Speaker 2: recent results. You know, they're talking about their forecast revenue
Speaker 2: will grow in the load a mid single digit percentage
Speaker 2: in the upcoming period. But boy, they're talking about a
Speaker 2: big gain in EPs net profitability. What are they doing
Speaker 2: on the cost side that's kind of bringing a lot
Speaker 2: more dollars down?
Speaker 7: Yeah, the FedEx story is all about cost cutting. The
Speaker 7: parcel market is a little soft right now. It's been
Speaker 7: that way for a few quarters. As people the revenge
Speaker 7: traveling and all the revenge experiences that people are buying,
Speaker 7: they're not buying as much stuff, so e commerce in
Speaker 7: the package delivery market's a little flat. So FedEx is
Speaker 7: cutting costs hard. That the new CEO, Rod Supermanium, came
Speaker 7: in a couple of years ago and announced this big
Speaker 7: transformation of FedEx, and he's doing it. There was some
Speaker 7: skepticism about how this would work, but he's winning over
Speaker 7: investors now because they've had several quarters in which they
Speaker 7: have increased margins even though their revenue has been on
Speaker 7: the decline because of the market pressure. So so far,
Speaker 7: so good for mister SUPERMANI.
Speaker 6: So you had a great opinion piece out about FedEx
Speaker 6: and you sort of broke down this logistics business and
Speaker 6: then what would be left afterwards, and how FedEx would
Speaker 6: be then a pure play small packaged delivery company, and
Speaker 6: then you'd have this behemoth logistics company. And is how
Speaker 6: much market share they really own? Can you talk us
Speaker 6: through some of those numbers, because I think of what's
Speaker 6: left of FedEx will be quite interesting in how to
Speaker 6: value it.
Speaker 7: Right, So what they would spin out would be there
Speaker 7: less than truckbload UH trucking company. And these are these
Speaker 7: are companies that have a network of warehouses and they
Speaker 7: bring in customers goods and they consolidate them so that
Speaker 7: they can fill a full trailer instead of just taking
Speaker 7: a partial trailer. So they're essentially a trucking It's a
Speaker 7: trucking company. So FedEx is going to keep all of
Speaker 7: its UH if it did spin that, it would keep
Speaker 7: all of its package delivery business. It also has some
Speaker 7: logistics business in which it helps customers move freight around
Speaker 7: the world. They do custom stuff and freight forwarding and
Speaker 7: so forth, so they would keep that as well with
Speaker 7: the main company. So this would be a trucking company.
Speaker 7: They've tried in the past to help to merge these
Speaker 7: companies a little bit more, in other words, having the
Speaker 7: trucking company do some of the package delivery and so forth,
Speaker 7: especially some of the large packages. I'm not sure it
Speaker 7: worked out that well, So maybe that's why they're pivoting
Speaker 7: and saying, well, maybe we could unlock more value instead
Speaker 7: of trying to integrate it more into our system, let's
Speaker 7: just go ahead and carve it out.
Speaker 2: You know, when we talk cost custs in this business,
Speaker 2: a lot of times it means headcount. What have they
Speaker 2: done on the headcount front, because it just seems like
Speaker 2: a labor intensive business.
Speaker 7: They've definitely have lowered some headcount. I don't have the
Speaker 7: numbers off the top of my head, but that's that's
Speaker 7: one of the things. The other is they're trying to
Speaker 7: consolidate their networks. And if they're in the past, if
Speaker 7: there was an express facility and a ground facility in
Speaker 7: the same vicinity, they would just continue to operate those
Speaker 7: and the trucks sometimes would arrive at your house. One
Speaker 7: would be an express truck, one would be a ground truck.
Speaker 7: They're trying to eliminate a lot of that duplication so
Speaker 7: in some cases they're consolidating facilities, they're handing off packages
Speaker 7: so that only one driver comes to your door or
Speaker 7: your business. So that's another way in which they're cutting costs.
Speaker 7: It's not all just head counted operational.
Speaker 6: Yeah, and clearly also, you know, spinning on the logistic
Speaker 6: business will help them cash flow there real quick before
Speaker 6: you let you go. If the spinoff of logistic business
Speaker 6: went the way of M and A, who might be
Speaker 6: potential buyers?
Speaker 2: Oh, good question.
Speaker 7: That's a little bit of shaky ground. But there are
Speaker 7: some large LTL players out there. I'd have to say
Speaker 7: XBO would come to mind, maybe because they have their chairman,
Speaker 7: Brad Jacobs has made a living by acquiring companies, so
Speaker 7: I wouldn't put them. I would put them on the list.
Speaker 7: In fact, when Yellow, which is another LTL carrier, went bankrupt,
Speaker 7: XBO bought the most of the assets. The assets were
Speaker 7: all divided up and sold and XBO came out with
Speaker 7: the lion's share of those. So it's it's it's willing
Speaker 7: to expand through acquisition, So I would put them on
Speaker 7: the list.
Speaker 2: All right, Very good, Thomas Black, Thank you very much
Speaker 2: for joining us. Really appreciate Thomas Black, Bloomberg opinion columnists,
Speaker 2: just giving us the latest on FedEx better and expect
Speaker 2: the results. Taking guidance up stock moving up here about
Speaker 2: about thirteen fourteen percent fifty two week high. About that
Speaker 2: for our friends at FedEx.
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Speaker 2: We're live here at the very loud Bloomberg invest Conference
Speaker 2: in Lower Manhattan. It's called the World Financial Center for
Speaker 2: those of us that were actually here back in the
Speaker 2: day down in Lower Manhattan, which by the way, is
Speaker 2: a great place. I'm gonna plug it yet again. Come
Speaker 2: down here in warm weather with the kids and stuff.
Speaker 2: There's you know, you're right on the river. Lots of
Speaker 2: cool restaurants, a lot of fun places for the kids
Speaker 2: are run around, big yachts there to look at. So
Speaker 2: it's a great part of the city that I think
Speaker 2: a lot of people kind of miss here. So in video,
Speaker 2: is that our drawdown the last few you know, that
Speaker 2: was it? That was it? Okay, now we're back up
Speaker 2: at it all right in videos up taking up the
Speaker 2: nastac so so so there you go. Let's talk about
Speaker 2: these markets here and where we go. Clark Chang, CEO
Speaker 2: and Chief investment Officer Merrimack Corporation. Clark is a Fuqua
Speaker 2: graduate at Duke University, so he's he's much younger than
Speaker 2: I am, but we will both went to the business exactly.
Speaker 2: Hey Clark, what do you feel about these markets here?
Speaker 2: What's kind of how are you approaching them right here?
Speaker 2: Because we've got a FED that presumably is going to
Speaker 2: be cutting raged at some time, I guess later rather
Speaker 2: than that, the sooner we've got decent earnings, how are
Speaker 2: you guys approaching it?
Speaker 8: I think the FED is thinking they're going to start
Speaker 8: cutting rage, So that's what people think in September and stuff.
Speaker 8: I think every time we talk about this it keeps
Speaker 8: getting delayed more and more, and I don't I think
Speaker 8: this market is very dependent on what the FED does,
Speaker 8: and they're timing of it. So growth is slowing down,
Speaker 8: unemployment is slowly starting to increase, things are heading in
Speaker 8: the right direction, Inflation is coming down, and it just
Speaker 8: depends on how the FED reacts. If they react too quickly.
Speaker 8: I think we could go the wrong direction. May they
Speaker 8: react to slow they go the other direction. So I
Speaker 8: think it's very conditional on how the FED, on how
Speaker 8: the FED basically performs.
Speaker 6: What I was struck with over the last day listening
Speaker 6: to a lot of the Bloomberg in Best Panels is
Speaker 6: how little the FED was really talked about, Like it
Speaker 6: was a little bit here and there, but it was
Speaker 6: mostly about AI, how to invest, what the potentials are,
Speaker 6: and private credit and sort of what do you do
Speaker 6: in that sector as part of the family off of
Speaker 6: how do you guys look at the best investment thesis
Speaker 6: for AI.
Speaker 8: AI is moving so fast that I don't think anyone
Speaker 8: has any idea what's going to happen with it. But
Speaker 8: it's going at an exponential pace. So you know, we
Speaker 8: went from like PCs to the internet, to mobile to
Speaker 8: the cloud, and I think AI is going to be
Speaker 8: much faster. But I think the things that are gonna
Speaker 8: change AI for this next generation, I don't think people
Speaker 8: can even comprehend, like even terms of making like entertainment
Speaker 8: and stuff like that, the like we don't need actors
Speaker 8: and actresses. Sora from Open AI can generate a video live,
Speaker 8: and I think this magic and secret is just in
Speaker 8: terms of how you prompt it.
Speaker 5: I think my artist soul is slowly dying, yes, but.
Speaker 8: It really is changing the world that I don't think
Speaker 8: people even understand. I think the danger of it is
Speaker 8: always going to be the deep fakes, the cybersecurity, all
Speaker 8: that stuff, because I think the hackers are much more
Speaker 8: innovative than the people defending against it, and they only
Speaker 8: have to win once. So I think that's the danger
Speaker 8: of it. I think people are starting to understand this.
Speaker 8: So I think we're starting to see dedicated AI models
Speaker 8: for specific countries. So I think Japan just invested in
Speaker 8: one for their country. I think India is looking at
Speaker 8: it too, because no one wants to be using the
Speaker 8: US LM model. Basically, it's using US data and as
Speaker 8: a result, it reflects more of the US population, the
Speaker 8: Western society and stuff like that. To do that and
Speaker 8: to run that in China is useless because the Chinese
Speaker 8: population they have so many restrictions on jaywalking or chewing
Speaker 8: gum or whatever that it just may not work over there.
Speaker 8: So I think AA is gonna be It's gonna be
Speaker 8: fascinating in terms of how impacts the world.
Speaker 2: The energy usage is.
Speaker 8: Going to be a huge issue. And I mean I
Speaker 8: was I was out in Las Vegas last week and
Speaker 8: William Jensen was actually speaking at an energy conference and
Speaker 8: he's you know, he's a tech guy and he's at
Speaker 8: an energy conference.
Speaker 6: But he was speaking with Edison International, which is the
Speaker 6: CEO that I've spoken to about power usage.
Speaker 5: They're based in California.
Speaker 6: So to that point, do you invest though in this thesis,
Speaker 6: like you're absolutely right, like everything you said makes complete sense.
Speaker 5: Do you make money off of that?
Speaker 8: No, we could definitely make money off I think it's
Speaker 8: changing so quickly. I think the problem is knowing who
Speaker 8: the winner is going to be, no matter what Navidia
Speaker 8: is doing for now, because everything they produce is sold
Speaker 8: out and everyone's trying to get ahead. And if you're
Speaker 8: not buying the chips, you're not going to be on
Speaker 8: the forefront of this technology. So I mean, if they
Speaker 8: can keep the market share that it's fantastic. I think
Speaker 8: they have a mode around them with the software and
Speaker 8: the chip, but I think it's just a home run
Speaker 8: right now.
Speaker 2: And what seems a little bit different AI versus say
Speaker 2: the Internet, for example, is the Internet was a whole
Speaker 2: bunch of new companies, disruptors, whether it's Google or Facebook,
Speaker 2: disrupting the existing business models. Here doesn't seem to be
Speaker 2: that way. It seems to be in Nvidia is the
Speaker 2: chip play. Maybe Microsoft's a software play, you know, and
Speaker 2: it's these existing incumbents that are investing in and building
Speaker 2: up AI capabilities. I guess that's the way to play it.
Speaker 8: It's all it's all in the data. The data is oil.
Speaker 8: The data is what trains these models. The investments that
Speaker 8: you need in the infrastructure in terms of these data
Speaker 8: centers can only come from the largest companies, like say Microsoft.
Speaker 8: I think Microsoft and open ai have a project that
Speaker 8: we working to build the biggest you know, data center
Speaker 8: of the world to basically run AI. So I think
Speaker 8: it is gonna be with those big winners that are
Speaker 8: out there. But if you're a small company, we see
Speaker 8: this a lot on the venture side. You develop something new,
Speaker 8: like say mid Junior, some of these you know videotype
Speaker 8: of creation models, you're you're basically out innovated within six
Speaker 8: months when open I released Sora. So like it's happening
Speaker 8: at such a fast pace set if you're a startup
Speaker 8: and you don't have the capital and the resources and
Speaker 8: the talent to innovate faster than the big guys. Your
Speaker 8: basic business model, business models is basically gone in six months.
Speaker 6: So you were on a panel that was titled meeting
Speaker 6: the Needs of the Rising Generation.
Speaker 5: What does that mean?
Speaker 6: Is that like, we don't have enough kids and everyone
Speaker 6: is gonna get old and there's a big fiscal deficit.
Speaker 6: Does that mean that it's gonna be super isolationist? What
Speaker 6: does that mean?
Speaker 8: I mean we do have a demographic problem. I think
Speaker 8: in the in the modern world where I think the
Speaker 8: population is declining, I think the people are getting older. Well,
Speaker 8: we were talking about earlier is more. There's an eighty
Speaker 8: four trillion dollars of a wealth that's going to be
Speaker 8: transferred from the baby boomers towards the next two generations.
Speaker 8: It's going to happen over the next twenty years. And
Speaker 8: the question is how does it happen? What is this
Speaker 8: next generation?
Speaker 7: Like, what are they?
Speaker 8: What are the what are their intentions? I think I
Speaker 8: think the the generation that generated the wealth after World
Speaker 8: War two, through through housing and through the stock market.
Speaker 8: I mean, their their intention was clear. They were trying
Speaker 8: to generate wealth and have a good cost of living
Speaker 8: and stuff like that. I think the next generation, I
Speaker 8: think is more idealistic, and they do want to help
Speaker 8: solve income inequality, they want to help solve climate impact ESG. Stuff.
Speaker 8: I think the danger with that is the fact that
Speaker 8: if you're not focused on one goal and you have
Speaker 8: conditional goals where this is the best investment relative to climate,
Speaker 8: it's it gets hard to measure how you're actually performing.
Speaker 8: And as a psychologist, we really wanted to make keep
Speaker 8: things simple. We want to have one goal. You can
Speaker 8: have another goal for a different part of your business,
Speaker 8: like say at the foundation, but to combine the two
Speaker 8: into one, I think you really never know how you're doing.
Speaker 2: So from an investment perspective, do you have that in
Speaker 2: your back in your mind?
Speaker 7: ESG.
Speaker 2: And let's not even use those letters because they become toxic.
Speaker 2: I guess it's just just is that part of your
Speaker 2: investment outlook, or you're just there focus on generating the
Speaker 2: best returns for your client.
Speaker 8: We're here to generate returns. And then we have another side,
Speaker 8: the foundation side that does all the charitable stuff. So
Speaker 8: we have two distinct goals and two separate parts of
Speaker 8: our businesses, but we try not to combine the two
Speaker 8: into one.
Speaker 6: Then I guess the question then becomes, how do you
Speaker 6: think of, say the deglobalization part, because you get the
Speaker 6: transfer of wealth. Yes, and we're also going to be
Speaker 6: in an entirely different few decades now as we were
Speaker 6: since like the Industrial revolution, kind of how do you
Speaker 6: think about that?
Speaker 8: I think the world is going in a very bad direction.
Speaker 8: I think if you read Destined for War, you're talking
Speaker 8: about the changes of economic powers. Every time one and
Speaker 8: two changes powered, there is some kind of war, whether
Speaker 8: it be a kinetic war or not. I don't think
Speaker 8: it's going to be the I think we are in
Speaker 8: a cyber war. We are in a tech war. I
Speaker 8: think between China and Russia, North Korea and Iran, they're
Speaker 8: gonna have their own tech stack and the US is
Speaker 8: gonna have our own tech stack with our own allies.
Speaker 8: So there's gonna be two distinct tech stacks are gonna
Speaker 8: be generated from each of these groups of nations. But
Speaker 8: I don't think we're going to share stuff. If you're
Speaker 8: reading the book of How the World Ends, they talk
Speaker 8: about all the cyber stuff, but it is scary the
Speaker 8: stuff that they can do. So I think ultimately that's
Speaker 8: where we're going. And as a result, I think the
Speaker 8: globalization is going to happen. That is going to be inflationary. However,
Speaker 8: that's going to go against AI, which is going to
Speaker 8: be very disinflationary too.
Speaker 2: Because we grew up in a general I'm gonna say
Speaker 2: the last at least a generation was all about globalization
Speaker 2: bringing barriers down out sign and then I know that
Speaker 2: turned maybe four or five, six, seven years ago. Is
Speaker 2: globalization dead?
Speaker 5: Do you think?
Speaker 8: I don't know if it's dead. It just made me
Speaker 8: more compartmentalized within each country's allies and stuff like that.
Speaker 8: It's just but I don't think it's going to be
Speaker 8: as global as it was before because China wasn't a threat,
Speaker 8: nor were the power economic power we were trying to
Speaker 8: I can convince him to come towards the US type
Speaker 8: of you know, type big Colombian market, but they're not
Speaker 8: going to head in that direction. So I think the
Speaker 8: world is changing right now and it's gonna be really
Speaker 8: interesting for this next generation.
Speaker 6: All right, Clark, we really appreciate Clark Chang's CEO and
Speaker 6: CIO of Marymac Corporation joining us here at Bloomberg invest
Speaker 6: I have to say, I don't envy having to think
Speaker 6: about these themes in the next few decades when literally
Speaker 6: nobody knows what it's going to be, whether it's AI
Speaker 6: and how that cyclical nature of that industry works, whether
Speaker 6: it's deglobilization and what that winds up looking like.
Speaker 5: It is very confusing.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Just Say Alexa Play Bloomberg eleven thirty.
Speaker 5: Alex you alongside Paul Sweeny.
Speaker 6: We are live from the Bloomberg and Best Conference in Manhattan,
Speaker 6: Lawer Manhattan, a beautiful.
Speaker 5: Two two five a Liberty Street.
Speaker 6: We're bringing together leaders from asset management, banking and private markets.
Speaker 6: Well here on set, I have a special guest for you.
Speaker 6: Rebecca Lynn is co founder and general partner of Canvas
Speaker 6: Ventures now. Canvas Ventures was founded in twenty thirteen and
Speaker 6: focuses on leading Series A and Series B investments around AI, say, fintech,
Speaker 6: digital health, A lot of stuff going on in that space,
Speaker 6: and Rebecca joins us.
Speaker 5: Now, Rebecca, thank you so much for joining us.
Speaker 9: Thank you for having me.
Speaker 6: So what do you like right now? Like, what's interesting
Speaker 6: to you? What's the market like? Give us some perspective
Speaker 6: of how you're thinking about things.
Speaker 9: Yeah, there's a lot that's happening right now in the
Speaker 9: market overall. I think AI is creating a real catalyst.
Speaker 9: We're hearing a lot about, you know, jen Ai with
Speaker 9: the launch of chat JPT just a year and a
Speaker 9: half ago. And the interesting thing is is this has
Speaker 9: been evolving for some time. I mean, we've been tracking
Speaker 9: the LLLM and the AI space for many years. We've
Speaker 9: had a number of exits in this space, you know,
Speaker 9: way dating back to Siri, you know, in my prior
Speaker 9: and most recently case text. And so what we're seeing
Speaker 9: is that Jenai can really supercharge many of the theses
Speaker 9: we've had for a very long time in both fintech
Speaker 9: and in digital health. One example is the ability to
Speaker 9: actually take all the call volume, for example, off of
Speaker 9: a physician practice is an incredible opportunity. Wealth Management is
Speaker 9: another company that we recently recently let an investment in
Speaker 9: where the company can actually perform all of the back
Speaker 9: office functionality that a wealth manager would typically do and
Speaker 9: quite frankly doesn't really want to do, right, all of
Speaker 9: the back office compliance, the emails, the reporting, the generation
Speaker 9: of reports, things that would take them ten to fifteen
Speaker 9: hours on average a week. JENAI can now lift off
Speaker 9: their shoulders and let them do what they do best,
Speaker 9: which is really interface with the clients.
Speaker 2: Right. So one of the things as I talked to
Speaker 2: just investors, they're saying, where's that AHA moment for AI?
Speaker 2: From an IPO perspective? So for example, for search we had,
Speaker 2: for social we had Facebook. Should we be anticipating an
Speaker 2: Aha ipel to come out of Sandhill Road and just
Speaker 2: blow the market away?
Speaker 9: You know, as an investor in early stage or early growth, right,
Speaker 9: we actually think the Aha moment is M and A OK.
Speaker 9: And so what's going to happen is all of these
Speaker 9: companies that are focused on solving real world problems with
Speaker 9: AI are going to be acquired by these very large
Speaker 9: tech companies that have consumer bases they can sell into.
Speaker 9: And that's what happened with case Text, right. Case Text
Speaker 9: had ten thousand of its own users, but their AI
Speaker 9: product was fundamentally disrupting all of Thompson Router's Oh and
Speaker 9: so Thompson Reuters had said publicly that they were going
Speaker 9: to invest a billion dollars in AI technology because they
Speaker 9: saw it disruptive to their entire business, right, and instead
Speaker 9: they bought case text, which they could plug right into
Speaker 9: their existing customer base.
Speaker 6: Do you feel like the regulatory environment is going to
Speaker 6: allow for stuff like that? Because I feel like, if,
Speaker 6: if anything, big tech making making big deals based on
Speaker 6: things that they need and don't want to compete against,
Speaker 6: it's not going to.
Speaker 5: Go so well.
Speaker 9: I mean, if they if they truly have a monopoly, right,
Speaker 9: But I think regulatory right now has bigger fish to
Speaker 9: fry personally.
Speaker 2: Okay, how about just fundraising in general? If I have
Speaker 2: an idea, I go to Sandhill Road and I try
Speaker 2: to get some capital. What's it like these days in
Speaker 2: raising capital? If I do I have to have an
Speaker 2: AI angle, can I get something done? Otherwise? What's it
Speaker 2: like raising money these days?
Speaker 9: You know what it's like raising money? I think it's
Speaker 9: very like the general the ecosystem. I first came into
Speaker 9: venture in in that O eight O nine time period
Speaker 9: where you know, the markets were a little bit frozen.
Speaker 9: In terms of early stage, we're seeing a decrease in
Speaker 9: like the seed and the A funding. Definitely seeing a
Speaker 9: lot more down rounds in the later stage. However, that
Speaker 9: was the biggest fund I've been involved in. That was
Speaker 9: a monster fund, right because what's happening right now is
Speaker 9: the same thing that happened back then. Where you know,
Speaker 9: venture capital firms have record amounts of cash, but because
Speaker 9: their valuations of their current companies got so over their skis,
Speaker 9: they're having to put their money and their current companies
Speaker 9: and not invest as much in new companies. And so
Speaker 9: if you kept sort of, if you kept sort of
Speaker 9: in a steady pace like we did, you're able to
Speaker 9: still invest in all of those new y early stage companies.
Speaker 9: But for the early stage company, it's nice because you
Speaker 9: don't have fifty other competitors being also backed, so you
Speaker 9: have some runway to move.
Speaker 6: In terms of exit strategies. I know you said M
Speaker 6: and A, is you think how it's going to go?
Speaker 6: What do you think the IPO market does, like when
Speaker 6: does that open up?
Speaker 7: When?
Speaker 9: So my crystal ball is not here with me today, However,
Speaker 9: you know, I think it's incredible what we've seen in
Speaker 9: the pipeline for IPOs. Right when we took Doximity public,
Speaker 9: the rule of thumb back then was, you know, one
Speaker 9: hundred million plus in revenue, you know, thirty percent to
Speaker 9: fifty percent growth year over year, you know, profitability. And
Speaker 9: they were profitable and they went out, which I think
Speaker 9: is very important.
Speaker 5: In the hopper we have.
Speaker 9: We have companies that have a billion dollars of revenue
Speaker 9: and are profitable, and so I think, what as soon
Speaker 9: as they're still private and they're still private, and we
Speaker 9: can talk about maybe why they're still private, but they're
Speaker 9: still private. And so when those go out and they
Speaker 9: go public and they have already proven their ability quarter
Speaker 9: over quarter to hit their plan and to hit their
Speaker 9: benchmarks and to be able to predict it. It's the
Speaker 9: number one recipe for success is to be able to
Speaker 9: being able to forecast and predict accurately. It's what we found.
Speaker 9: I think that's going to bolster the market overall and
Speaker 9: really open the gates for other companies when that happens real.
Speaker 2: Quick thirty seconds. What's it like for you to raise
Speaker 2: venture capital money? Are people still looking to put money
Speaker 2: and venture.
Speaker 9: You know they are looking to put money. Investor but
Speaker 9: in venture. But it's tough because they are really people
Speaker 9: are for some reason are focused on these multi billion
Speaker 9: dollar funds which probably aren't going to return more than
Speaker 9: the public markets. Okay, and so yeah, for an early
Speaker 9: stage fund, I think we have a lot of opportunity.
Speaker 2: Great stuff, Rebecca, thank you so much for joining us.
Speaker 2: Rebecca Lynn, she's a co founder and general partner of
Speaker 2: Canvas Ventures based in San Francisco, but she found her
Speaker 2: way here to Lower man and to be at the
Speaker 2: Bloomberg invest conference here in Lower Manhattan. I always wonder
Speaker 2: what it's like if it's gonna be M and A
Speaker 2: because it just doesn't seem like the IPO market is
Speaker 2: as as I thought it would be up fifteen percent
Speaker 2: this year up, you know, thirty forty percent off that
Speaker 2: October twenty three.
Speaker 6: Low.
Speaker 2: I mean, back in the day, I could get these
Speaker 2: companies out the door. Right, I don't know what's going on.
Speaker 6: I mean, but back in the day, would the M
Speaker 6: and A market have been as robust as maybe it
Speaker 6: could be now?
Speaker 2: Yeah, I don't know. I'm just thinking this younger generation
Speaker 2: just not as Oh, Paul, exactly right.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 2: Alex Steel Paul Sweeney were live here in a Bloomberg
Speaker 2: Interactor Roker Studio actually downtown at the Bloomberg invest Conference.
Speaker 2: We've moved it downtown to the World Financial ud Bloomberg
Speaker 2: Invest Conference. A lot of good stuff going on down here.
Speaker 2: You know, there's one of the great stories in global
Speaker 2: financial services and wealth management is this supposed transfer of wealth,
Speaker 2: like a jillion dollars of wealth from baby boomers, which
Speaker 2: I qualify by like a year to like the Gen
Speaker 2: X and gen Z. Well, I'll tell you what I've
Speaker 2: told my kids, four of them. The last check I
Speaker 2: write is going to bounce, So don't wait on me,
Speaker 2: get the work and start saving. But I understand it's
Speaker 2: a thing. Emily Green Joints is ahead of wealth management
Speaker 2: at Elvest. Emily, can you frame out what this opportunity
Speaker 2: is in wealth management? Because people are telling me there's
Speaker 2: gonna be a pretty big wealth transfer over the next
Speaker 2: generation or.
Speaker 10: So, Yeah, definitely, and it's already started. Okay, So the
Speaker 10: numbers vary depending on what people say, but it's looking
Speaker 10: at anywhere from eighty four trillion to one hundred and
Speaker 10: twenty nine trillion have been named to actually move to
Speaker 10: the next generations. There's been a lot of talk millennials,
Speaker 10: but to your point, actually Gen X and Gen Z
Speaker 10: have been talked about a lot more more recently as well.
Speaker 10: And what people have really forgotten is actually the first
Speaker 10: transfer is going to go from the husbands to the
Speaker 10: wives within there. And so we talk a lot about
Speaker 10: those millennials, but the wives are actually getting the money already,
Speaker 10: and so this is something that's already ocurring. And so
Speaker 10: you look at thirty trillion dollars by twenty thirty should
Speaker 10: have transferred to women.
Speaker 6: Oh wow, which is really where labs comes in your
Speaker 6: CEO of Sally crowcheck yep. And this is all about
Speaker 6: sort of helping investing in wealth management company that's built
Speaker 6: by women and for women. How does this differ from
Speaker 6: another wealth manager?
Speaker 10: For example, Yeah, I worked at a traditional wealth manager,
Speaker 10: one of the biggest wealth manager for a long time,
Speaker 10: and people often ask us this, and you know number one,
Speaker 10: just the numbers of financial advisors. I think what people
Speaker 10: also forget in this great wealth transfer is that over
Speaker 10: fifty percent of advisors are over the age of fifty five.
Speaker 10: There's going to be an enormous transfer of advisors as well.
Speaker 10: We're starting to see it a lot of people coming
Speaker 10: to us and saying, advisors, my advisor retired, what do
Speaker 10: I do?
Speaker 5: And so?
Speaker 10: And you sit in a lot of rooms. In seventy
Speaker 10: percent of advisors, there's a lot of time or over
Speaker 10: the age of seventy and not below the age of thirty.
Speaker 10: So what's going to happen within here? And so what
Speaker 10: all of us eighty three percent of our team is women. Overall,
Speaker 10: all of our advisors are women. It's very rare within here.
Speaker 10: And so just that we are her within there and
Speaker 10: so that we hear her. And so when people when
Speaker 10: women are going through divorce, widowhood, inheritance, all these things
Speaker 10: that are occurring that our team actually reflects. That has
Speaker 10: been an enormous way for us to actually gather clients
Speaker 10: within here. And then the other thing that we really
Speaker 10: see is these women, this next generation has been looking
Speaker 10: for more impact ESG investing, impact, whatever we want to
Speaker 10: call it. We can throw a lot of labels at this,
Speaker 10: but how do we actually align their values to their money?
Speaker 2: So on the first point there, where do you get
Speaker 2: these young women to be advisors? Where do you get them?
Speaker 2: Because I know even the traditional investment banks have a
Speaker 2: hard time.
Speaker 6: Yeah, No, we just went we just went to an
Speaker 6: event in Nashville. Yeah, and we're just you know.
Speaker 10: It's not easy. And I'll tell you that I spent
Speaker 10: a lot of time looking at it, a lot of
Speaker 10: resumes of people who apply and such. It's not all
Speaker 10: young women, you know. I have some advisors. I one
Speaker 10: of the top advisors on my team a woman in
Speaker 10: her mid fifties. She was a large advisor at Wells
Speaker 10: Fargo for a long time. She went through something that
Speaker 10: was really soul searching for her. She had breast cancer
Speaker 10: and it made her really realize she needed to do
Speaker 10: something more meaningful in her life. And so finding advisors
Speaker 10: like that where she was making a ton of money,
Speaker 10: she was good, she had a huge book of business.
Speaker 10: She didn't need to leave Wells Fargo. You know, these advisors,
Speaker 10: they don't need to make that transition. But she decided
Speaker 10: she'd need to do something more meaningful, and that a
Speaker 10: lot of advisors I find that are in their you know,
Speaker 10: mid thirties and trying to figure out, like how do
Speaker 10: I make something for myself? And really those advisors who
Speaker 10: may be at that point where they're going to have children,
Speaker 10: they're thinking about what their career is going to look
Speaker 10: like at these big banks, at these large broker dealers,
Speaker 10: and they start to reflect and say, I'd rather be
Speaker 10: somewhere like Elevest. And so we've recruited a lot from
Speaker 10: these large broker dealers.
Speaker 6: Well, I was gonna say, what is your recruitment process?
Speaker 6: Like how easy is it to pitch? Like what's the
Speaker 6: what's the track record?
Speaker 10: It's pretty good. We get a lot of applications. I
Speaker 10: always joke to people, people be like, did you see
Speaker 10: my friend's application? Because I do get the emails. I
Speaker 10: don't read everyone's application every single day. We get a
Speaker 10: lot of them. That's so great, it's wonderful in a
Speaker 10: lot of So what do you look for them? It's
Speaker 10: it really varies within here. So I always tell people
Speaker 10: I need a couple of different things. And actually, my
Speaker 10: biggest problem of hiring advisors, especially from the big broker dealers,
Speaker 10: and I come from I worked at JPMorgan where they
Speaker 10: tell you what to say every day. You know you're
Speaker 10: very trained, and is really finding people who can have
Speaker 10: that ability to think for themselves and to learn and
Speaker 10: to realize that our business six months ago was different
Speaker 10: than it is six months from now, and it will
Speaker 10: be different twelve months from now. And so how are
Speaker 10: you actually building with us within there and then really
Speaker 10: thinking about that person who was passionate to our mission.
Speaker 10: I can feel from an advisor if they're just trying
Speaker 10: to come work for Sally Crotcheck or if they really
Speaker 10: want to we want to do and it is always amazing.
Speaker 10: Like I work with Sally very closely. I forget that
Speaker 10: she's Sally, and people you know, they want to meet her,
Speaker 10: they want to go through it, they want to do that.
Speaker 10: And so we do get a good amount of that
Speaker 10: within the process.
Speaker 5: Start with people have oh wow, Sally.
Speaker 10: And so you have to work through the people who
Speaker 10: are going to be able to sit in a room,
Speaker 10: hold their own and show that they actually care about
Speaker 10: the last mission and that they're going to be able
Speaker 10: to relate to women.
Speaker 2: What's a typical Elvest client look like? So and what
Speaker 2: do they need?
Speaker 10: We have clients Elevest overall, we have clients from zero
Speaker 10: to tens of millions. Within there, I run our wealth
Speaker 10: management business and so that has kind of two parts
Speaker 10: within it. We have a mass affluent business and a
Speaker 10: traditional more high ultra high network business. Our average client
Speaker 10: sets between two and ten million of investable assets. We
Speaker 10: do have family offices who come in and we do
Speaker 10: a lot of more private investing within there, and so
Speaker 10: they're typically people who need a financial plan, need that guidance,
Speaker 10: need some decision making in order to think about what
Speaker 10: does retirement look like. I would tell you none of
Speaker 10: our clients. I have one client where retirement means golf
Speaker 10: every day. Most of them it means I want to
Speaker 10: leave my huge mag seven job and go do something different.
Speaker 10: I need to do something meaningful, I want to start
Speaker 10: a business. Whatever that means in us helping guide them
Speaker 10: through that. And then we invest across all ASCID classes.
Speaker 10: So we do stocks, bonds, and alternative investing, and that's
Speaker 10: where we've gathered or a lot of clients. Actually is
Speaker 10: the differentiated alternative investing that we really do, which is
Speaker 10: not the big guys, It's not the names that we
Speaker 10: all know. It's not the places that all the large
Speaker 10: broker dealers put on their platform. These are like bespoke
Speaker 10: managers that could be fifty to a couple hundred million
Speaker 10: in AUM managers, and people really leave some of these
Speaker 10: big broker dealers to have some of these very opportunistic ideas.
Speaker 5: So interesting, really cool.
Speaker 6: I'm the women who come to you, are they also
Speaker 6: tend to be married or is it more just like
Speaker 6: you really focus on the women's side.
Speaker 10: Great question. People ask me this all the time. Yes,
Speaker 10: forty percent of our clients are actually meant in wealth
Speaker 10: management because sometimes women marry men. It happens, and so
Speaker 10: most of them are married. Actually, And what you find
Speaker 10: is a lot of times the woman has to have
Speaker 10: some authority over the money. So she made it, she
Speaker 10: inherited it, she's the one who controls it in some way,
Speaker 10: and she comes and we have clients who maybe for
Speaker 10: a little while they manage their money separately, and then
Speaker 10: a year later he comes overtly, Yeah, comes across the corner,
Speaker 10: you know, comes to that zoom meeting and it's like
Speaker 10: I don't like me.
Speaker 6: Yeah, really amazing, This is such great stuff. I learned
Speaker 6: a lot on the Green Thank you so very much.
Speaker 6: Head of Wealth Management at.
Speaker 5: Elves CEO, of course, is Sally Crocheck.
Speaker 10: There.
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Speaker 5: All right, malex, you alongside pause.
Speaker 6: We need this at Bloomberg Intelligence Radio and we are
Speaker 6: broadcasting to you live from the Bloomberg invest Write Conference
Speaker 6: right here in Lawer Manhattan, bringing together the leaders from
Speaker 6: asset management, banking in private markets. It's wrapping up in
Speaker 6: just a few hours, but it's been a really fun
Speaker 6: day and a half. We also keep you updated on
Speaker 6: all the fun, juicy Wall Street stories, and for that
Speaker 6: we're going to go back to seven thirty one legs
Speaker 6: to shrin Anarajan in the Bloomberg Interactive Broker Studio. A. Shri,
Speaker 6: you have an amazing big take story that you co
Speaker 6: authored and it's called the last seventy two hours of
Speaker 6: our kegos. I can't imagine what reporting this story out
Speaker 6: must have been like, can you walk us through can
Speaker 6: you give us the cliff notes to the seventy two hours.
Speaker 11: Look, this is a story that's fascinated Wall Street for
Speaker 11: much of the last three years. Right Billhong out of nowhere,
Speaker 11: had built up such enormous wealth, had a family office,
Speaker 11: and yet hid wealth had gone from a billion to
Speaker 11: four billion, from four billion to thirty six billion in
Speaker 11: a span of six months. That all collapsed very publicly
Speaker 11: in March twenty twenty one, when in a matter of
Speaker 11: days he lost his entire fortune. Everyone on Wall Street
Speaker 11: has been trying to figure out what happened, how it happened,
Speaker 11: and a lot of the details have been dribbling out
Speaker 11: for the last few years. But over the last few
Speaker 11: weeks any court room in downtown Manhattan, Bill Huong is
Speaker 11: on trial. Prosecutors accused him of manipulating markets, of defrauding lenders.
Speaker 11: But after having spent a lot of time in the courtroom,
Speaker 11: another key takeaway from it all has been that Wall
Speaker 11: Street doesn't look all that great. Here was someone whose
Speaker 11: personal wealth might have been thirty six billion dollars, but
Speaker 11: he had another one hundred and twenty five billion dollars
Speaker 11: in borrowed money. He had a gross portfolio size of
Speaker 11: one hundred and sixty billion dollars, making concentrated bets on
Speaker 11: much of the same names, and all the banks were
Speaker 11: largely caught unawares. Yes, they got vague answers, evasive answers,
Speaker 11: but they also relied on pinky promises effectively to give
Speaker 11: him so much fire for his bets. And in the
Speaker 11: end the banks were burnt badly, lost over ten billion dollars,
Speaker 11: and one of those banks, the most badly hit credit Squeeze,
Speaker 11: doesn't even exist anymore, and you could argue Bill Hung's
Speaker 11: firm played a key role in that.
Speaker 2: So Shree, what I found fascionating about this article, and
Speaker 2: it's a great minute by minute walk through a seventy
Speaker 2: two hour period when it all kind of came to
Speaker 2: an end for everyone involved, was that the banks did
Speaker 2: not know that Bilhuang and his firm was layering on
Speaker 2: such concentrated bets across various firms. One bank didn't know
Speaker 2: what the other bank was doing. Therefore they didn't know
Speaker 2: the magnitude of the exposure. How did that happen?
Speaker 11: And look in all the conversations we have, they will
Speaker 11: tell you we're not allowed to ask. If you're in
Speaker 11: the prime brokerage business, if you're in the business of
Speaker 11: extending leverage to your client, the client doesn't necessarily have
Speaker 11: to tell you or show you their exact portfolio. They
Speaker 11: will claim secrecy, they will claim proprietary information. But at
Speaker 11: the end of the day, banks can also say, if
Speaker 11: you don't give me as many disclosures as possible, I
Speaker 11: will not give you that money.
Speaker 2: That never happened.
Speaker 11: These guys would come in and say, yes, we have
Speaker 11: a diversified portfolio, and yes, don't worry, we have all
Speaker 11: the controls in place, and it's across a mix of names,
Speaker 11: and the banks would believe that, Yes, they expect honesty
Speaker 11: and truthful answers. And if they didn't get that, and
Speaker 11: you can see why the DOJ wants to go after
Speaker 11: Billhong and Archie goes. But just think about it for
Speaker 11: a moment. You walk into a bank today as a
Speaker 11: retail customer and want a ten thousand dollars loan or
Speaker 11: a mortgage, or you are trying to get into a
Speaker 11: co op. The hoops that one has to jump through,
Speaker 11: the signatures you have to get I mean to get
Speaker 11: into a co op. You will need three witnesses, three friends,
Speaker 11: your high school teacher, your college professor, and so many other.
Speaker 5: People when you're first born man, and if you're getting
Speaker 5: into a co op.
Speaker 11: Pretty much and in this case, he as someone who
Speaker 11: said I would like five billion dollars in capacity, Actually,
Speaker 11: can we increase it ten billion now? Because my portfolio
Speaker 11: sizes increase and all the banks are doing you're sure
Speaker 11: you're you're good for that right and we can trust
Speaker 11: you that you're investing well and you're doing this responsibility.
Speaker 10: Yep, yep.
Speaker 11: Great not They didn't even require written declarations about what
Speaker 11: the portfolio looks like. These were phone conversations and that
Speaker 11: was convincing enough for them to extend this kind of money.
Speaker 11: And that's why for us it's yes, the legal process
Speaker 11: will follow its own path, and the jury of twelve
Speaker 11: New York because will decide whether Bill Hoong his CFO
Speaker 11: if they are guilty or not on the charges that
Speaker 11: have been brought against them. But it's not a great
Speaker 11: look for Wall three.
Speaker 6: So in terms of Wall Street, could this happen again
Speaker 6: or do you think now things will be rethought? Those
Speaker 6: pinky pinky swears will be by the wayside.
Speaker 11: By the way, I was told by one of the
Speaker 11: editors that pinky swears are the highest grade of promises
Speaker 11: out there. So if you can't rely on that, what
Speaker 11: do you rely on. I will make the point though,
Speaker 11: that the lack of copycats before our kid goes or
Speaker 11: even after our k goes, isn't necessarily reflection of a
Speaker 11: new regime of banking, of strengthen controls of great oversight.
Speaker 11: As much as in the case of our gecos there
Speaker 11: was one man who was willing to take a pliant
Speaker 11: system to the extremes. There was a lot of noise
Speaker 11: about bringing in rules. Family officers don't face the same
Speaker 11: kind of oversight as hatch funds, and they will talk
Speaker 11: about what can be changed, how the rules need to
Speaker 11: be modified. Some have been put in place, but for
Speaker 11: the most part it's been a lot of talk, and
Speaker 11: these things take time. The worry still remains. And look,
Speaker 11: this happened recently, so the banks are perhaps shry of
Speaker 11: doing this with someone else, but it's not entirely clear
Speaker 11: to me how they avoid a repeat of this situation.
Speaker 11: If someone else comes along and follows this, you know,
Speaker 11: you may want to call it what might have looked
Speaker 11: like genius investing to start with, but really at the
Speaker 11: end of it reckless investing. If they follow the same pattern,
Speaker 11: can we be guaranteed that they won't be a repeat?
Speaker 11: I don't know, and Credit Swiss will tell you it
Speaker 11: doesn't even matter, because they don't. They don't exist anymore
Speaker 11: to be able to tell you if there will be
Speaker 11: a repeat or not. That was the kind of consequence
Speaker 11: we saw from the collapse of this one film.
Speaker 2: Any says how this trial is gonna gorocery, Well, it's
Speaker 2: it's fascinating.
Speaker 11: It's happening in the court room of a nineteen year
Speaker 11: old judge, right, and you have you have a jury
Speaker 11: most of them, well all of them had never heard
Speaker 11: of Bill Hoong or archade Goes before, and and that
Speaker 11: kind of means that they have been getting a finance
Speaker 11: one o one finance one on one sounds challenging in itself,
Speaker 11: But then if the prosecutors and the defense lawyers have
Speaker 11: to spend much of their time trying to explain security
Speaker 11: based swaps, margin leverage, even discuss what memes talks and
Speaker 11: what they're not, and have to define for some of
Speaker 11: these people what Goldman Sachs is It'll be very interesting
Speaker 11: to see how it pans out. Because when you're listening
Speaker 11: to some of the arguments in court, when you when
Speaker 11: you when you hear prosecutors talk about a lot of
Speaker 11: heavy investing towards close of market, they were lifting the
Speaker 11: firm limit to dry and drive the price up. And
Speaker 11: yet on counter you kind of understand that that is
Speaker 11: how business is done on Wall Street. I mean, some
Speaker 11: of this jargon sounds sinister, but isn't necessarily sinister. But
Speaker 11: how we see and perceive it doesn't matter. It's what's
Speaker 11: getting through to the jury. The prosecution rests its case today,
Speaker 11: the defense gets another couple of days, and after a
Speaker 11: break next week, we will come back with closing remarks,
Speaker 11: and then we will get the final verdict on this one.
Speaker 2: All right, that's gonna be fascinating. This is a fascinating article.
Speaker 2: Big Take article on the Bloomberg trumbling check out on
Speaker 2: a Bloomberg dot com slash Big Take as well. Shrinanna
Speaker 2: Roger and Bloomberg News senior financial reporter on the Big
Speaker 2: Take story. The last seventy two hours of our chae
Speaker 2: goes and you I've been reading it this whole time.
Speaker 2: Here It's just minute by minute, and it is a
Speaker 2: really amazing look at this explosion.
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